China’s ambitious Belt and Road Initiative, the country’s long-term global investment strategy, has captured widespread attention as China expands its economic reach. AidData, a research initiative that has focused on China for the past 12 years, has documented the expansive reach of Chinese investments, highlighting concerns surrounding national security and economic dominance.
China’s banking system is the biggest in the world. It exceeds three times the great banking sectors of America, Europe, and Japan combined. This sprawling credit apparatus allows Beijing to partially subsidize the purchase of valuable foreign assets, including many major acquisitions right here in the United States. In 2015, Chinese conglomerate Fosun Group bought Wright USA. This private firm is thought to have deep ties with the Chinese leadership. This purchase sent shockwaves through the drone market and CFIUS was forced to take notice. They started an investigation because of Wright USA’s access to sensitive information on American intelligence officers.
In 2017 Chinese government banks lent $800 million to help a consortium acquire Nexperia, a semiconductor maker. Two years later, control of Nexperia passed to another Chinese company, Wingtech. This trend is part of a larger pattern, in which state-supported financing pushes Chinese companies into key industries around the world. China is accelerating the pace of such technological development through its 15th five-year plan. By 2025, the country wants to be leading in ten core sectors such as robotics and electric vehicles.
Brad Parks, the executive director of AidData, noted a newfound consciousness among most G7 countries. First, they are starting to understand the tremendous scale of Chinese investments. “At first blush, they thought it was just a lot of individual initiative from Chinese companies,” he noted. Yet it has been increasingly evident that Beijing is instrumental in orchestrating these financial endeavors.
“I think what they’ve learned over time is that actually Beijing’s party state is behind the scenes writing the cheques to make this happen.” – Brad Parks
Parks underscored the importance of changing perceptions in how and where Chinese money goes. “For many years, we assumed that virtually all of China’s money flows were going to developing countries,” he stated. The truth is much more complicated. As a result, hundreds of billions of dollars have flooded into developed countries like the United States, United Kingdom, and Germany.
The ramifications of these investments go far beyond just these financial transactions. In addition, in many instances they present major national security concerns. Victor Shih, director of the 21st Century China Centre, shared alarming insights about the implications of foreign ownership of sensitive companies. “Someone with direct knowledge called me up and said, ‘Do you know that the insurance company that insures intelligence personnel is owned by the Chinese?’ This declaration highlights the fragile state of the nexus between trade and national defense.
The financial landscape is evolving quickly as Chinese investments seek new homes in nations more open to foreign capital. More than 70% of foreign container shipping terminals at Rotterdam, Europe’s largest port, are currently Chinese-owned. This move represents a big strategic move by China. It is trying to make a larger global footprint, while coming under increasing pressure from Western countries.
Parks underscored that Chinese firms are still very much interested in making such acquisitions. In the post-2012 transportation world, they are now under increased scrutiny for where they get the money from. “There are many Chinese companies that are still trying to make these types of acquisitions,” he affirmed. The difference now is the comprehensive vetting processes that a number of governments worried about foreign interference implemented.
“So China makes its move. China is not the follower anymore, it is the leader. It is the pace setter.” – Brad Parks
The Chinese government maintains tight control over its foreign spending strategies, often considering specific details—including expenditure amounts and recipient countries—a state secret. This degree of opacity serves to heighten fear and suspicion among foreign governments as to what China actually hopes to accomplish.
“There are all kinds of plans still being published,” he remarked, referring to various initiatives including an artificial intelligence plan and a smart manufacturing plan. He emphasized that “the mother of all plans is the 15th five-year plan.”
As the geopolitical picture changes, Western countries are increasingly coming to terms with just how much China’s economic strength has grown. Parks hopes to see all G7 countries depart from a defensive stance. They will take a more positive approach, fulfilling the challenge of countering China’s expanding global footprint.
“What I’m anticipating is that many G7 countries are going to move from the back foot to the front foot.” – Brad Parks
While it is welcome to see the visibility of Chinese investments increasing, it may be more critical to consider long-term strategies and potential international relations backlash. Countries are operating under incredibly difficult circumstances. The tension between economic interests and national security is sure to take center stage in their conversations.