As war continues in Ukraine and COVID-19 forces more major lockdowns in China, European companies are investing more in the United States because of its relative stability in today's turbulent world, The Wall Street Journal is reporting Saturday.
"America is our chance for strong strategic growth," the Journal reported Volkswagen AG Chief Executive Herbert Diess telling reporters Wednesday, as he announced the doubling of its Chattanooga, Tennessee, factory, and plans to open a second plant to serve the U.S. market.
Pandora CEO Alexander Lacik said his Danish jewelry company purchased 32 stores on the West Coast as it pauses Chinese expansion as that country faces economic pressures of its own.
"With the current conditions, there is really no point in over-investing in China. So, now it's more like we're holding the fort and we'll just have to sit and wait for a little while," he told the Journal.
According to a Jan. 3 story from The Diplomat, China's economy is facing "major disruptions" stemming from the trade war with the U.S., a resurgence of the COVID-19 pandemic, and power shortages, which are exacerbating a downturn in the real estate market there and inflation.
The article said that internal restrictions caused developers like Evergrande to default on some debt repayments, and a slowing of the commercial market, are blocking the financial health of its economy.
Meanwhile, China is also having COVID-fueled logistical issues, labor and power shortages, and high commodity prices have driven prices upward and are now being passed on to customers, increasing inflation there, The Diplomat reports.
As Russia continues its war in Ukraine, Europe and the world are rippling with the economic consequences including higher food and prices, a March blog post from the International Monetary Fund said.
Neighboring countries, according to the IMF, are seeing disruptions in the trade and supply chain areas, as well as higher inflation, and a large flow of refugees entering their countries as the war persists.
This confluence of turbulent factors is making the European businesses consider more investment in the American economy, that while facing its own challenges with labor, inflation, and the supply chain, is more stable, and is growing.
The Journal report said the U.S. economy is expected to grow by about 3.7% this year, compared to the 2.8% growth expected in the Eurozone, and just 2% growth expected in China this year.
"The headwinds facing the economy are not just likely to slow [China's] growth this year: They are reasons to think that China's growth will remain weak for years to come," Capital Economics chief economist Neil Shearing told the Journal.
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