Nicaragua Taiwan move may foster Chinese investment

Headline NICARAGUA: Taiwan move may foster Chinese investment

Significance China and India, which have long had difficult relations, have only partially disengaged from a border stand-off in the Western Himalayas that began in May 2020. Although bilateral trade is up this year, several deals for China to invest in Indian businesses are now frozen. Impacts India and China will maintain large numbers of troops along their mutual border, with a reduced no man’s land between them. Delhi will increase defence purchases from Washington and other key partners. Western and Japanese investment in India’s tech sector will grow markedly.


Subject Laos's development outlook. Significance Second-stage construction of the Xayaburi hydroelectric dam began on January 26, as part of Vientiane's wider scheme for national infrastructure development. Laos's development efforts have long been accompanied by considerable international criticism of its human rights record. These criticisms will acquire fresh significance as Vientiane intensifies development efforts anticipating the ASEAN Economic Community (AEC) in late 2015, and prepares to take the ASEAN chair in 2016. Impacts Progress on ASEAN human rights mechanisms will probably be limited under Laos's 2016 chairmanship. China's importance to Laos's infrastructural development will grow, despite some local controversy over Chinese investment. Laos will maintain economic and diplomatic links with Vietnam, Thailand and Cambodia.


Subject The possible economic impact of the EU investment plan (the 'Juncker Plan'). Significance The EU investment plan launched by European Commission President Jean-Claude Juncker just over a year ago has made a slow start. This will encourage doubts that have existed since the scheme's inception about its operation and likely impact. Impacts Even by 2020, the EU economy will still probably require every effort to boost growth and make up for lost investment. Given continuing strong demand for high-grade bonds and equity investments, it should be possible to achieve the fundraising target. The plan could become a vehicle for Chinese investment into the EU: China is talking of 5-10 billion euros in future investments. The geographical distribution of funded projects could be politically sensitive within the EU. The plan could come under scrutiny during the UK EU referendum campaign; UK projects may come too late to have an impact before the vote.


Subject Relations between sub-national governments in Taiwan and China. Significance China is attempting to bypass Taiwan’s central government -- with which it has severed formal ties -- and forge better relations with major municipalities and locally elected leaders. These efforts have found greater success since recent local elections that dealt major setbacks to the ruling Democratic Progressive Party (DPP). Impacts Politicians from both parties will be emboldened to turn to Chinese investment to stimulate local economies. Han Kuo-yu, newly elected mayor of Kaohsiung city, could lead the main opposition party’s comeback at the national level. Relations with China are likely to play a decisive role once again in Taiwan’s 2020 national elections.


Subject China's foreign policy machinery. Significance China has a more assertive foreign policy doctrine than it had even just ten years ago. Beijing's 1980s-90s maxim of 'hide your light and bide your time' gave way to the 'peaceful rise' of the 2000s. President Xi Jinping has, in turn, refashioned this as part of the 'Great rejuvenation of the Chinese nation'. Impacts Rising Chinese investment and aid will increase favourable views of China and political support for Beijing, but not consistently. If China were better able to clarify its foreign policy goals, fewer people and states would view it with caution. China’s international media presence will improve its image and its influence, though some countries will be more receptive than others.


Subject The high failure rate of Chinese investment overseas. Significance When Chinese leaders host or visit their foreign counterparts, they often announce investment or aid agreements that run into billions of dollars. However, the new investments that actually happen are often much smaller, both because 'pledges' include projects already under way and because genuinely new projects are often delayed or cancelled. Impacts Politically driven non-profitable investments by state-owned enterprises may keep China's failure rate high by international comparisons. New regulations will change the geographic and sectoral distribution of investment, but not necessarily increase the completion rate. Growing availability of services that assist firms with overseas investment will lead to an increase in smaller firms investing overseas.


Subject India's new policy on FDI and its impact on Chinese investment. Significance India last month introduced stricter rules for investment from bordering countries, saying it wanted to prevent “opportunistic” takeovers and acquisitions at a time when the COVID-19 pandemic is bringing down the share value of major Indian companies. The move, notified under the Foreign Exchange Management Act, was almost certainly made with China in mind. China is one of India’s fastest-growing sources of foreign direct investment (FDI). Impacts Chinese manufacturers will favour investment in certain South-east Asian countries rather than India in the short term. India may fast-track Chinese investment in infrastructure while putting those in fintech under greater scrutiny. Once the pandemic crisis dissipates, India will roll out ambitious plans to attract foreign factories relocating from China.


Subject Fidesz’s electoral support. Significance A coherent ideology of radical nationalism, social-conservative values and resistance to such progressive liberal values as ethnic and sexual minority rights, pro-choice movements, multiculturalism, secularism and open markets appeals to many voters, accords with prevailing social attitudes and supports ruling Fidesz’s re-engineering of the democratic checks and balances installed after 1989. It would not be in the interest of Prime Minister Viktor Orban to undo this and re-establish independent institutions. Impacts Fidesz will engage with like-minded movements and intellectuals across Europe and beyond. It will continue to welcome Chinese investment and improve relations with Russia. Opposition-supporting young urbanites are unlikely to break into national politics, stuck in their own bubble of like-minded radicals. A pro-natalist policy will encourage families to produce more ‘true Hungarians’.


Subject The outlook for China-North Korea foreign relations. Significance A ceremony in Pyongyang on December 17 marked the third anniversary of the death of Kim Jong-il. Unlike on previous occasions, no Chinese delegation was invited. Official exchanges between North Korea and its sole ally have slowed to a trickle. Beijing has frozen investment in North Korean infrastructure. Chinese and North Korean state media exchange critical remarks. Frustrated with Pyongyang's snubs and its perseverance with its nuclear weapons programme, Beijing is putting more pressure on North Korea than ever before -- while Pyongyang attempts to reduce China's ability to do this and retaliates in kind. Impacts North Korea's dire track record vis-a-vis foreign investors will hamstring its attempts to drum up investor interest more widely. Despite China's presumed influence, Chinese investors are far from immune to political risk. Political risk has increased for Chinese investors in North Korea, but has not fallen for non-Chinese investors. Russia will be offered investment opportunities in North Korea, but will accept only projects viable on purely commercial grounds. Though disappointment has repeatedly followed promising signs, South Korea offers the highest-potential alternative to Chinese investment.


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