New Research Shows Huge US Economic Footprint in Strategic Region

US Secretary of Commerce Wilbur Ross (L) stands beside Japan’s Nippon Export and Investment Insurance chairman and CEO Atsuo Kuroda during a signing agreement at the Indo-Pacific Business Forum in Bangkok on November 4, 2019, on the sidelines of the 35th Association of Southeast Asian Nations (ASEAN) Summit. New research shows huge U.S. economic footprint in the strategic region

The U.S. economic footprint in the Indo-Pacific area has increased significantly in recent years, as Washington seeks to counter China’s growing influence in the region.

“U.S. trade, aid, remittances, and foreign direct investment totaled $24.5 trillion and grew by 18% from 2012 to 2022,” according to a report by AidData, an international development research lab at William & Mary’s Global Research Institute.

The Indo-Pacific, as a geographic and geopolitical construct, became a key focus of U.S. foreign policy under former president Donald Trump’s administration. The area encompasses the region from India to New Zealand and is currently home to about 60% of the global population, according to the AidData report, published in February.

Chinese leader Xi Jinping’s signature Belt and Road Initiative, an infrastructure and aid project, has increased the country’s global footprint since it was announced almost a decade ago. In recent years, the U.S. has sought to counter China’s growing influence and massive investment in infrastructure by developing its economic footprint and providing aid and investment to many countries in the Indo-Pacific region.

The Chinese economy has been facing headwinds at home, with recent data showing that foreign direct investment (FDI) flowing into China has stalled. Last year, FDI into China hit its lowest increase since the early 1990s, marking a significant challenge for Beijing as it seeks to attract more overseas capital to bolster its economy, Bloomberg reported on February 18.

According to the outlet, China’s State Administration of Foreign Exchange, a government institution under the control of China’s central bank, said on February 18 that China’s direct investment liabilities in its balance of payments amounted to $33 billion in the past year.

The downturn reflects the impact of COVID-related lockdowns and a sluggish recovery, with investment dropping for the first time since 1998 in the third quarter of 2023, before slightly rebounding in the last quarter, Bloomberg reported.

But despite the domestic economic slowdown, Chinese state institutions and companies continue to invest heavily abroad.

“China’s overall outward direct investment (ODI) was US$40.5 billion in the first quarter of 2023, representing a significant year-on-year increase of 18%,” Ernst and Young wrote in a report on the country’s economy. “The non-financial ODI was US$31.5 billion, up 17.2% YOY.”

“The Belt and Road (B&R) non-financial ODI increased 9.5% YOY to US$5.8 billion,” according to Loletta Chow, Global China Overseas Investment Network Leader at Ernst and Young.

Newsweek contacted China’s embassy in Washington, D.C., for comment.

The beneficiaries of U.S. interest in the region are major Asian countries and small island economies.

“There is, of course, a high volume of economic activities focused on large and populous economies in the region,” said Samantha Custer, director of policy analysis at AidData. “But strikingly, it is small island economies in the Pacific that attracted outsized engagement on a per capita basis, as a revealed priority for the U.S.”

U.S. companies and entities have significantly increased their foreign direct investment bound for the region, according to AidData

“Outbound foreign direct investment from the U.S. to the Indo-Pacific ($11 trillion) and U.S. imports from these economies ($13 trillion) were the major drivers of this economic value,” the report said.

The U.S. government (USG) has directly used its financial tools to support economic growth in the region as China has increased its spending on infrastructure projects and other kinds of financial assistance.

“The USG channeled $53.6 billion in concessional financing to the Indo-Pacific via bilateral and multilateral channels. Complementing these efforts, 20 U.S. private philanthropies mobilized $7 billion in financing and programming to support Indo-Pacific economies—an uptick of 66 percent between 2012 and 2022,” the report said.

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