(De)globalization monitor : capital flows and cross-border investment

Deglobalization has taken media and think tank circles by storm. So far there is little consensus in the literature on whether deglobalization is taking place or not. Against this background, we focus on recent developments in global and bilateral capital flows and cross-border investment. Our analysis produced the following main findings: While global capital flows, measured relative to global GDP, increased substantially before the financial crisis, they decreased afterward and have failed to recover so far. Measures of capital flow concentration show that capital moves to fewer destinations, albeit on a small scale. Measures of source countries' investment stocks, differentiated by destinations and relative to their global investment activity, reveal interesting patterns for the period 2018-2022: First, regarding foreign direct investment (FDI), the United States (USA) and the euro area show no signs of near-shoring while China significantly increased its FDI stock in Asia compared with its stock in other regions. Second, regarding portfolio investment (PI), there are signs of near-shoring of China's stock of PI as well as Asia's stock of PI (within Asia and China). We do not see signs of near-shoring for the USA or the euro area. More (analytical) research is clearly needed to properly assess the role of geopolitical fragmentation in the global allocation of capital and investment.