Seen in the context of the developing world now accounting for half of global GDP (measured by purchasing power), it is inevitable that some of the funds earned by export will be redeployed in FDI. But, unlike the recycled petrodollars that are aimed at trophy real estate and a broad range of financial investments, some of China’s rising and politically troubling foreign currency surpluses are being used to purchase or establish production businesses – the kind that employ US and European citizens.

The rise of Chinese investment has also been expanding in Latin America and Africa, tied to the sourcing of raw materials and gaining toeholds in consumer markets. However, unlike during the European colonial era –when raw materials were extracted and high-quality, but high-priced, goods were sold to the local elites – the Chinese are selling ‘affordable’ goods and more of them, perhaps winning local hearts and minds.

A different motivation altogether is likely to contribute to the growing Chinese interest in investing in US and European economies: namely, gaining access to leading-edge technologies. One measure of this interest is that there are now at least 10 Chinese company R&D centres operating in the EU and probably more to come there and in North America.

A millennium ago, China and India were the world’s two largest economies. After a long time-out, growth has returned and in the ‘new normal’ of the global economy, their overall rise and related outbound investment flows are already changing the FDI landscape. In 2005, Chinese FDI grew by more than 100% to $12bn-plus, with mergers and acquisitions accounting for about half.

In the 1980s, when direct investment into the US from Japan was increasingly visible, it is said that the US states maintained a larger compliment of promoters in Tokyo than in their lobbying offices in Washington. Governors were literally bumping into each other as they called on major Japanese corporations. One of those companies advised me that they had senior (or at least senior in years) people whose main job was to receive the unending stream of investment attraction delegations graciously. Similar journeys to China began some time ago and will undoubtedly accelerate in the days ahead.

Daniel Malachuk works with business and government leaders on global direct investment strategies. He has advised many of the world’s leading companies and served in the public sector as director of White House operations.

E-mail:malachuk@oxford-analytica.com