'This extremely unintuitive conclusion seems to fly in the face of many years of policy direction and behavior, but it follows automatically from working logically through the ways in which foreign investment affects recipient countries.''But like many other widely shared assumptions among economists about what is or isn’t good for the economy, this assumption is too rigid. Foreign capital inflows into any country can lead to an increase in productive investment only under certain circumstances. Under other circumstances, these inflows are more likely to lead to either more unemployment or more debt. What matters are the underlying conditions in a given country and, to a lesser extent, conditions in the country from which the investment originates. In fact, as I will show below, while Chinese investment can cause developing economies to grow faster, it is unlikely systematically to benefit the UK or other advanced economies.
This extremely unintuitive conclusion seems to fly in the face of many years of policy direction and behavior, but it follows automatically from working logically through the ways in which foreign investment affects recipient countries. The key is to recognize that an assumption that implicitly governs much classical economics—that capital is a scarce resource—while probably true for most of modern economic history is now obsolete, at least for most advanced economies. Because countries like the UK do not suffer from a scarcity of investible capital, the benefits of foreign investment are not nearly what once was believed.'
- Michael Pettis,
Does the UK Benefit From Chinese Investment? June 05, 2019
Context'China’s Vision of Victory .. is of a world under authoritarian rule .. incompatible with U.S. democracy.'