“Sitting on the Fence” or Finding a “Dynamic Balance” in a Third-Party Country's Responses to the Us- China Rivalry in FDI : A New Zealand Perspective

The US-China trade war has demonstrated the security risk for third-party countries. This paper discusses the implications of the US-China rivalry on FDI policies of a third-party country such as New Zealand which has traditionally maintained a security alliance with the US while having also fostered a strong economic tie with China in recent years. We posit that dynamic balancing is a desirable objective for a third-party country aiming to strike a balance between national security and economic interest during a power struggle between two most influential partners. To do so, the third-party country must evaluate the situational momentum in the international environment, and favor one partner (the US) in one dimension (national security) but simultaneously favor another partner (China) in another dimension (economic interest) during the strategic rivalry. The country should explicitly and sufficiently incorporate these preferences in their FDI policies