The Significance of Global Capital Allocation
Who controls the concentration of global capital? From 2010 to 2023, nearly half of the world's net capital allocation was centered in the United States, at $7.3 trillion, followed by the United Kingdom at $1.5 trillion, Canada at $0.56 trillion, Australia and France at approximately $0.3 trillion each. This concentration reflects the accumulated difference between net borrowing and lending in the international market, also known as the accumulated current account deficit.
These countries are leaders among developed nations. In this context, we are considering net investment rather than gross investment, as indicated by the accumulated Current Account (CTA) balance.
Leading Developed Nations
Among developing countries, there is a significant list of nations heavily dependent on foreign capital inflows from 2010 to 2023 (a span of 14 years): Brazil ($0.87 trillion), India ($0.59 trillion), Turkey ($0.5 trillion), Mexico ($0.23 trillion), Colombia ($0.2 trillion), and Indonesia ($0.17 trillion).
This list of developing nations relies heavily on international creditors, which are often Western countries. This dependence impacts their ability to take an anti-American stance.
Currently, approximately 93% of global portfolio investment originates from western countries, along with 84 - 88% of direct and other investments. China and Hong Kong contribute about 70% to cross-border money flows among neutral countries.
In essence, the world can be divided into two poles: the United States and its allies, and China and its allies.
When considering the United States, it's worth noting that in recent years, more than 95% of foreign capital inflows into the US have come from countries loyal to the United States, such as Europe, Japan, South Korea, Canada, and Australia. This situates the US within a comfortable political, economic, and financial ecosystem of strategic allies.
Conversely, China is gradually reducing its dependence on international investors and is increasingly focusing on its own foreign expansion. In this regard, China appears to attract countries that are not aligned with the pro-American discourse (such as Russia, Iran, Venezuela, North Korea, Syria, and various African nations) into its own sphere of influence.
Conclusion
In the realm of global finance and economic influence, the world is increasingly divided into two poles: the United States and China, each with its own approach to capital allocation and international engagement.
The United States, backed by its staunch allies in Europe, Japan, South Korea, Canada, and Australia, maintains a dominant position in attracting foreign capital. With over 95% of foreign capital inflows coming from friendly countries, the U.S. is in a comfortable political, economic, and financial ecosystem. This not only strengthens the country's economic stability, but also enhances its global diplomatic and strategic status.