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1. The European Screening Mechanism and Its Implications for Chinese FDI

Author:
Emanuele Ballestracci
Publication Date:
02-2025
Content Type:
Commentary and Analysis
Institution:
Istituto Affari Internazionali
Abstract:
The European Commission has recently proposed a revision of the EU foreign direct investment (FDI) screening mechanism, originally established in 2020. The aim is to further strengthen the EU’s economic security within the framework of its “de-risking” policy, which aims to manage risks coming from the economic and technological engagement with China.[1] The new proposal aims to address major shortcomings in the current screening mechanism, expanding its scope to greenfield investments and European outward FDI. However, this could conflict with the EU’s goal of encouraging Chinese greenfield investment and joint ventures, particularly in the electric vehicle (EV) sector.
Topic:
Science and Technology, Foreign Direct Investment, European Union, and Economic Security
Political Geography:
China, Europe, and Asia

2. Untethered Sentiments: How Politics, Visibility, Perception, and Demographic Differences Shape American Views on Foreign Investment and Trade

Author:
Je Heon (James) Kim and Nils Wollesen Osterberg
Publication Date:
05-2025
Content Type:
Special Report
Institution:
Korea Economic Institute of America (KEI)
Abstract:
The key takeaways from this study are as follows: 1. Impact of Perception on Foreign Investment Attitudes: The study finds that individual perceptions of FDI at the state level play a crucial role in shaping attitudes toward investment. Individuals who perceive high Korean FDI or states where Korean FDI has more visibility tend to have more favorable views toward foreign investment compared to those in states with low FDI or visibility of such investments. This finding highlights the importance of strategic communication and visibility in shaping public perceptions of foreign investment. Simply increasing investment is not enough; companies and governments must actively promote their contributions to local economic growth and job creation to gain broader public support. 2. Variation in Support Based on Country of Origin: While most Americans view foreign investments as beneficial, attitudes differ based on the investing country’s origin. Investments from South Korea, Japan, and Germany, for instance, are viewed more favorably than investments from China and Russia. 3. Political and Ideological Divides in Trade and Tariff Attitudes: The data reveals partisan differences regarding trade and tariffs. According to our data, a substantial majority of Republicans—at the time of this survey—favor tariffs, mirroring their party leader’s policies. Meanwhile, a minority of Democrats expressed similar support for the use of tariffs. 4. Dissonance on Trade and Tariffs: Despite broad support for U.S. participation in international trade, a significant portion of respondents also favor maintaining or increasing tariffs, suggesting support for the theoretical benefits of trade and protectionism. Evidence suggests that partisan or ideological drivers may be at work. 5. Demographic Influences on Trade and Investment Opinions: Factors such as gender, age, income, and education significantly impact trade attitudes. Younger individuals, higher-income earners, and those with higher education levels are more supportive of open trade, while lower-income and older individuals are more skeptical. 6. Reciprocity as a Key Factor in Investment Policy Preferences: Many Americans favor restrictions on inbound foreign investment unless similar restrictions are removed for U.S. investments abroad, highlighting the importance of the reciprocal approach to trade and investment policies. 7. Limited Influence of Job Creation on Investment Preferences: While respondents recognize that foreign investments create jobs, this factor alone does not significantly sway opinions on investment restrictions, as other economic and political considerations often take precedence. 8. Defense Industrial Cooperation and Export Control Concerns: A majority of respondents support maintaining or increasing restrictions on defense-related industrial cooperation, emphasizing national security concerns over economic benefits from defense-related investments and trade.
Topic:
Politics, Science and Technology, Foreign Direct Investment, Trade, and Economic Security
Political Geography:
North America and United States of America

3. The future of Indonesia’s green industrial policy

Author:
Robert Walker and Hilman Palaon
Publication Date:
03-2025
Content Type:
Commentary and Analysis
Institution:
Lowy Institute for International Policy
Abstract:
Indonesia now supplies more than half of the world’s nickel. Under its green industrial policy, it has also become a leading destination for foreign investment in critical minerals, electric vehicles (EVs), and the battery supply chain. While this strategy has offered some concentrated economic gains, rapid industry expansion has also been costly. Nickel processing has had damaging environmental, labour, and governance impacts, and has increased reliance on Chinese investment, technology, and demand, which presents vulnerabilities. Indonesia can strengthen its industrial policy by improving environmental and labour standards in the nickel industry, fostering a more competitive and export-oriented EV industry, and diversifying trade and investment partners.
Topic:
Foreign Direct Investment, Industry, Green Economy, Nickel, and Critical Minerals
Political Geography:
China, Indonesia, and Southeast Asia

4. Peripheral Growth Models and the Global Economy: A Second Image IPE Perspective

Author:
Michael Schedelik and Andreas Nölke
Publication Date:
07-2025
Content Type:
Working Paper
Institution:
Max Planck Institute for the Study of Societies
Abstract:
The paper departs from the perspective of “second image IPE,” i.e., the need to closely combine Comparative Political Economy (CPE) and International Political Economy (IPE). More specifically, it focuses on the observation that the growth models in the (former) periphery of the global economy (a typical focus of CPE) are strongly shaped by their interdependencies with the structural transformations of the global economy (as studied by IPE). At the same time, the changes within the growth models of large economies in this periphery (CPE) can have a major impact on global interdependencies (IPE). For example, the rise of China as a major player in world trade and investment (“China shock”) has had a substantial impact on growth models elsewhere in the periphery, via import penetration, direct investment, and export demand. This paper shows how these growth models shape (and are shaped through) international interdependencies by analyzing (1) the effects of global commodity cycles on the growth experience of several major exporters of primary resources, such as Brazil or Indonesia, during and after the recent commodity boom. (2) We further elaborate on the effects of global financial cycles on peripheral countries, particularly those pursuing debt-led growth models, such as South Africa or Turkey. (3) We finally point to the role of global production chains and foreign direct investment for FDI-led growth models of manufacturing exporters such as Thailand or Vietnam in South East Asia.
Topic:
Political Economy, Foreign Direct Investment, Economy, Economic Growth, Commodities, Emerging Economies, and Growth Models
Political Geography:
Global Focus

5. Services Liberalization and Product Variety of Manufacturing Firms

Author:
Alina Mulykova
Publication Date:
07-2025
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
This paper investigates the impact of services sector liberalization on product innovation of downstream manufacturing firms. Leveraging firm-product panel data from India and employing a shift-share research design, I find that services liberalization significantly increases firms’ product portfolio. Allowing foreign investments in the banking sector decreases firm’s credit-constraint and increases the amount of interest payments on short-term loans. This shows that services liberalization reduces firms’ fixed costs of product innovation. Firms diversify into input-similar industries which changes the distribution of sales across products with the core product experiencing the most pronounced decline in the sales share.
Topic:
Globalization, Markets, Foreign Direct Investment, Innovation, and Liberalization
Political Geography:
South Asia and India

6. Productivity spillovers from FDI: A firm-level cross-country analysis

Author:
JaeBin Ahn, Shekhar Aiyar, and Andrea F. Presbitero
Publication Date:
07-2024
Content Type:
Working Paper
Institution:
Bruegel
Abstract:
This paper provides cross-country firm-level evidence on productivity spillovers from foreign direct investment (FDI), separately for greenfield FDI and cross-border mergers and acquisitions (M&As). The granularity of bilateral sector-level FDI datasets allows for addressing possible endogeneity issues by applying a two-step approach whereby an exogenous FDI measure is constructed from a gravity-type regression of bilateral FDI flows. When looking at the effects of greenfield investments on firm labour productivity we find: i) positive intra-industry spillover effects for firms located in advanced countries, and ii) positive backward spillover effects for firms located in emerging and developing countries. These spillovers are driven entirely by FDI from advanced countries. The results from cross-border M&As are noisier, with weakly suggestive evidence for positive intra-industry spillovers in advanced countries but negative backward spillovers in emerging markets and developing countries.
Topic:
Foreign Direct Investment, Business, and Productivity
Political Geography:
Global Focus

7. Wooing foreign investors: Greenland should prepare for the next dispute

Author:
Rafael Cox Alomar and Ulrik Pram Gad
Publication Date:
04-2024
Content Type:
Policy Brief
Institution:
Danish Institute for International Studies (DIIS)
Abstract:
Foreign direct investment (FDI) in energy and mining projects is critical for many resource-rich countries that wish to use their resources for economic development. However, from an investor perspective, projects are vulnerable to state intervention. Due to the intense global competition for FDI, countries therefore go to great lengths in assuring foreign investors that disputes will be resolved fairly. The current dispute over the Kuannersuit mining project demonstrates the legal and policy challenges facing Greenland as it aspires to economic and constitutional independence.
Topic:
Foreign Direct Investment, Mining, and Energy
Political Geography:
Greenland

8. The Future of the Belt and Road in Europe: How China’s Connectivity Project is Being Reconfigured across the Old Continent – and What It Means for the Euro-Atlantic Alliance

Author:
Nicola Casarini
Publication Date:
02-2024
Content Type:
Working Paper
Institution:
Istituto Affari Internazionali
Abstract:
China’s Belt and Road Initiative (BRI) has entered the twilight zone in the old continent, following a deterioration of bilateral relations between the EU member states and China over the last years. Italy’s official exit from the BRI at the end of 2023 was a further blow to Chinese President Xi Jinping’s signature foreign policy. Yet, the BRI in Europe is being reconfigured rather than being terminated. In Western Europe, the BRI is moving away from physical infrastructure projects and investment in industrial assets – the latter being increasingly protected from Chinese takeovers by both national and EU legislation – to financial and monetary connectivity. This shift is welcomed by various European actors, including some policymakers at the national level, eurozone institutions and major banks. Concurrently, most of Eastern European countries continue to promote BRI projects and seek to attract Chinese investments, suggesting that there is a two-speed Europe when it comes to China, both in terms of geography and sectors.
Topic:
Infrastructure, Foreign Direct Investment, European Union, Belt and Road Initiative (BRI), and Currency
Political Geography:
China, Europe, Asia, and Italy

9. Where are the Growth Potentials in CESEE? An Illustration of Sectors and Products Using the Product Space

Author:
Francesca Guadagno, Doris Hanzl-Weiss, and Robert Stehrer
Publication Date:
07-2024
Content Type:
Special Report
Institution:
The Vienna Institute for International Economic Studies (WIIW)
Abstract:
This paper investigates the sectoral and export structures as well as the product spaces of 11 economies in Central, East and Southeast Europe (CESEE). We first employ an analysis based on revealed comparative advantages (RCAs) to identify promising sectors for future growth and then combine this analysis with a product space approach to detect related and complex products that could help these economies diversify and upgrade. The RCA analysis shows that the CESEE countries still hold a comparative advantage in manufacturing, although a slightly negative trend emerged between 2013 and 2020. Meanwhile, some services – particularly computer programming, consultancy and information service activities – have emerged as the most successful sectors to date. The product space analysis indicates that for the majority of the CESEE economies, it is possible to identify relatively complex products that could be easily targeted to spur upgrading. We also find that while we run the analysis separately for each of the 11 CESEE countries, the identified opportunities are often the same. While this is intuitively explained by the similar specialisations of these 11 countries, from a policy perspective this finding implies that each country has to deploy a battery of indicators to identify profitable and realistic niches within these broadly defined product categories.
Topic:
International Trade and Finance, Foreign Direct Investment, European Union, and Competition
Political Geography:
Europe

10. Can Multinationals Withstand Growing Trade Barriers?

Author:
Mahdi Ghodsi, Michael Landesmann, and Nina Vujanović
Publication Date:
01-2024
Content Type:
Working Paper
Institution:
The Vienna Institute for International Economic Studies (WIIW)
Abstract:
Multinational enterprises (MNEs) are increasingly dealing with challenges shaped by the new geopolitical and trade environments. Besides traditional tariffs, exporting firms need to comply with regulatory non-tariff measures (NTMs) in the form of technical barriers to trade (TBTs) and sanitary and phytosanitary (SPS) measures. Although trade costs associated with these policy measures affect all firms, implications could be multifaceted for multinationals that base their international activities on exporting and importing and are important for the formation of global supply chains. Applying Poisson pseudo maximum likelihood to the unique Orbis dataset of firms on multinational subsidiaries, we show that NTMs pose a greater challenge to MNEs’ subsidiaries’ activity and performance than tariffs do. High-tech manufacturing subsidiaries of foreign MNEs are particularly vulnerable to these NTMs, as they suffer higher regulatory losses. However, multinational affiliates that have higher productivity, those with full foreign ownership representation, those that are embedded within a larger international network of subsidiaries, and those that are located in trading partners with deep preferential trade agreements can turn these trade challenges to their advantage. Our results have important implications for policy makers regulating trade in goods.
Topic:
International Trade and Finance, Foreign Direct Investment, Multinational Corporations, Tariffs, and Supply Chains
Political Geography:
Global Focus