It is a new one: China has overtaken the United States as the world’s top destination for new foreign direct investment . Also, in 2020, China was the only major economy to grow its GDP. Since 2017, foreign direct investment in the U.S. has been slipping. Of course, if you do not allow China to invest in your economy, that is a default expected outcome.
China overtook the U.S. as the world’s top destination for new foreign direct investment last year, as the Covid-19 pandemic amplifies an eastward shift in the center of gravity of the global economy.
New investments by overseas businesses into the U.S., which for decades held the No. 1 spot, fell 49% in 2020, according to U.N. figures released Sunday, as the country struggled to curb the spread of the new coronavirus and economic output slumped.
China, long ranked No. 2, saw direct investments by foreign companies climb 4%, the United Nations Conference on Trade and Development said. Beijing used strict lockdowns to largely contain Covid-19 after the disease first emerged in a central Chinese city, and China’s gross domestic product grew even as most other major economies contracted last year.
But that is not the message: the message is that China is doing today what actually made America great. China has invested in infrastructure and deepened its human capital – “China has 60,000 miles of high-speed rail; America ZERO”.
2) China forty years ago consciously adopted the American Model for economic growth–large sustained public investment in infrastructure and human capital. America has largely abandoned these investments and has already declined significantly (See Alden, Failure to Adjust). China has 60,000 miles of high-speed rail; America ZERO. Europe has several thousand miles. Our infrastructure is rotting and extracts an annual “tax” north of $600 BILLION; we don’t spent enough to fill potholes let along build a modern airport or port. China, India, and Europe have all vastly improved their universities and research centers; America’s have declined and shrunk. America once led the world in both infrastructure and human capital–we are now an also-ran. 1993 America was 1st in college completion rate for that cohort, now ranks 19th or lower, nearly last among all developed economies. And now 28th in publicly funded University based research, behind Slovenia!
The main purchasing power party in China – Middle Class has been growing rapidly after 2018. The huge amount of educated factory workers gives China a competitive advantage among the international competition. Modern infrastructures and stable social environment bringing more and more foreign investment into China. In 2020, Chinese authorities established a new economic model called “The Inner-cycle”. In the future, China will spend more time focusing on a more openly domestic financial market, new technology, and innovation in order to achieve its vision in 2050 – a fully developed country.
Largely, China did two main things:
- It invested in infrastructure and that helped it to improve the efficiency of business systems in the country. With that, productivity has improved, making production largely competitive against most competitors.
- It invested in core technical education positioning itself as the manufacturing center of the world. Today, China has young people with top modern skills to work in factories.
If Nigeria does these two things and some others I have noted in this Harvard Business Review article, we will emerge. These constructs are fundamental if you trace the history of modern societies: nations do not rise faster than their abilities to accumulate and utilize knowledge. In other words, if you cannot create new knowledge, and have the capacity to use it, you will fade. But if you do, you will thrive.
Of course, investing in infrastructure and educating the young people require resources. Nigeria has blown its oil resources, and getting into the building phase at this time of limited resources, in the midst of the expanding population, would be challenging. But if there are ways to make those happen, good things will happen. From roads to energy to healthcare systems, Nigeria has to invest in critical infrastructure. Then following the investments with a revamped technical education will offer a new vista for growth and prosperity.