China's direct investment in Indo-Pacific: A quantitative assessment

We provide in this chapter a quantitative assessment of the global effects, i.e., the effects on the countries concerned, as well as on mainland China, the European Union, the United States and the rest of the world, following an increase of Chinese direct investment in the Indo-Pacific region. The empirical methodology makes use of a Computable General Equilibrium model, which allows obtaining the consequences of changes in a particular variable on the whole economy under analysis, together with the specific effects across the different productive sectors. The results show that an increase in Chinese direct investment would have a mostly positive and significant effect on the GDP levels of the Indo-Pacific countries, especially in Pakistan, Indonesia, Vietnam, Malaysia and India; and, to a lower extent, Australia, New Zealand, Singapore and Thailand. These results were mostly driven by increases in consumption, since investment fell in almost all cases. The effects on the other world regions proved to be very small.