John Whelan: Chinese FDI could be an insurance policy for Ireland against US volatility
Serbia, Jinping’s Recipients Two In Hungary Europe The Largest Chinese Trip 2019 Fdi First To Europe Since Was Of To Xi And
There are a lot of conversations taking place these days around the incoming Donald Trump administration’s focus on bringing home jobs and investment to the US. If the election campaign rhetoric develops into concrete action, Ireland stands out as potentially one of the big losers over the next four years of US Republican rule.
Ireland receives four times more investments from US corporations than the EU average as a percentage of the economy. In 2024, the US flow of investment into Ireland continued at pace.
IDA Ireland announced that investment approvals in the first half of 2024 reached a record high, maintaining the upward trend from prior years, predominantly coming from US corporations.
The prospect of a global trade war and Mr Trump’s proposal to slash corporation tax to 15%, allied to the possible targeting of the strong US investment in pharmaceutical and the information and communication technology sector based in Ireland, could have particular implications for continued investment here and for the associated and enormous tax receipts.
The macro picture remains mired by volatility, uncertainty, complexity, and ambiguity, primarily associated with our extreme dependence on trade and investment with the US.
Diversifying the focus of foreign direct investment is overdue. Many think China, the second largest economy globally, is the obvious diversification option to pursue.
There have been attempts by IDA Ireland to diversify having expanded their offices in China.
However, Ireland has lost ground since Chinese premier Xi Jinping visited Ireland in 2012.
Earlier this year, Mr Jinping’s first trip to Europe since 2019, the focus of his visit was Hungary and Serbia, the two largest recipients of Chinese foreign direct investment [FDI] in Europe during the past three years.
Between 2021 and 2023, China-based companies made €11.2bn of investment pledges in Hungary, and €6.5bn in Serbia, more than in any other European country. Compared to the cumulative €9.2bn Chinese investment to date into Ireland, it is clear that we are losing the attention of the Asian mega power.
Mr Jinping’s trip is an “indicator of how different the world is today” and reveals a shift in China’s strategy in Europe towards smaller economies which are “willing to stand shoulder to shoulder” with Beijing.
Getting closer to China is clearly a prerequisite for ensuring more FDI investments from Chinese companies, but it also puts the Irish Government in the diplomatically awkward position of luring many of the very Chinese companies that the US has sanctioned.
Two examples are the telecoms firm Huawei and drugs company WuXi Biologics.
In May, Ireland’s minister of state for trade promotion, Dara Calleary, welcomed a report celebrating how Huawei was contributing €800m per year to the Irish economy. The firm has three research and development centres in Ireland.
Britain has moved in the same direction, ordering phone networks to remove Huawei components, and mobile phone networks in many Western nations, including Ireland, no longer offer Huawei handsets.
Meanwhile, WuXi has, since 2018, invested more than €1bn in a facility in Dundalk.
Earlier this month, the US House of Representatives passed a bill to restrict US firms’ ability to work with WuXi, again citing national security concerns.
In 2020, some 25 Chinese companies had operations in the Republic of Ireland. By this year, the number had jumped to 40 — inclusive of the European headquarters of TikTok, Temu, and Shein — but this is still minuscule to the 970 US corporations here.
Given how much Ireland’s economy depends on FDI, some economists say Chinese investment in Ireland can be seen as a welcome insurance policy in case some US firms pull out. Others say Ireland is playing a “dangerous geopolitical game” for a small economy.