The Great Reallocation Revisited: How Foreign Direct Investment Is (and Is Not) Shifting amid Heightened Geopolitical Tensions

This paper studies how geopolitical factors affect global greenfield foreign direct investment. Using detailed project-level data and new measures of geopolitical exposure and global value-chain linkages, the analysis examines investment responses to geopolitical inflection points. The results show declining investment into the People’s Republic of China and partial diversion to other regions, but also highlight how deep value-chain integration constrains firms’ ability to relocate production at scale.