In dieser Folge empfängt Dr. Timo Blenk die China- und Ostasien-Expertin Dr. May-Britt Stumbaum und spricht mit ihr über Chinas außenpolitische Strategie, innenpolitische Herausforderungen und die Nachbar- und Partnerländer der Großmacht. Welche Ambitionen verfolgt das Reich der Mitte langfristig in seiner Außenpolitik? Welche Rolle spielt der demographische Faktor für das extrem bevölkerungsreiche Land? Und welchen Umgang muss Deutschland mit China finden angesichts geopolitischer Verflechtungen und wirtschaftlicher Abhängigkeiten?

In dieser Folge spricht Dr. Timo Blenk mit dem ehemaligen 4-Sterne-General Hans-Lothar Domröse über den Krieg in der Ukraine, der bereits ein Jahr andauert. Dabei stehen nicht nur die direkten Folgen des Krieges in der Ukraine im Fokus sondern auch mittelbare Konsequenzen auf die Sicherheitsarchitektur der NATO und EU sowie die Rolle Chinas und der USA in aktuellen Konflikten.

In der ersten Folge "Welt im Umbruch - Neue Weltordnung und Strategische Herausforderungen" diskutiert Dr. Timo Blenk mit dem deutschen Spitzendiplomaten Botschafter a.D. Prof. Dr. Wolfgang Ischinger über die Umbruchsphase der internationalen Weltordnung und strategische geopolitische Herausforderungen.

Auf einen Blick Bisherige Entwürfe der China Strategie der Bundesregierung forcieren Diversifizierungsinitiativen, um kritische Abhängigkeiten der deutschen Wirtschaft vom chinesischen Markt deutlich zu reduzieren. Auch wenn ein komplettes Decoupling politisch nicht forciert wird, sollen Krisenszenarien einen möglichen Worst-Case simulieren, bei dem erhebliche Teile des China Geschäfts für deutsche Unternehmen wegfallen würden, zum Beispiel bei einem chinesischen Angriff auf Taiwan. Der sich intensivierende Großmachtkonflikt zwischen den Vereinigten Staaten von Amerika und der Volksrepublik China bringt europäische Hochtechnologieunternehmen zunehmend in Bedrängnis und Deutschland läuft Gefahr, auch in Friedenszeiten zwischen die Fronten zu geraten. Auswirkungen auf deutsche Unternehmen Gesteigerte Mitteilungspflichten zu Chinageschäften bedeuten ein höheres Maß an Informationsweitergabe an die Bundesregierung. Gezielte Stresstests bei besonders exponierten Unternehmen sollen den möglichen Wegfall des Chinageschäftes bzw. das Ausbleiben von Zulieferungen aus China simulieren. Die Politik erwartet und forciert, dass sich deutsche Wirtschafts- und Lieferbeziehungen diversifizieren, um einseitige Abhängigkeiten vom chinesischen Markt abzubauen. Politische Unterstützung für Chinageschäfte soll in Zukunft auf nachweislich positive Effekte für den Standort Deutschland evaluiert werden. Bestehende Regulierungsinstrumentarien werden erweitert, womöglich auch um einen Kontrollmechanismus für Investitionen deutscher Firmen in Drittstaaten wie China (Outbound Investment Screening). Der Stand der Dinge Russlands Angriffskrieg gegen die Ukraine und das anschließend verhängte Sanktionsregime verdeutlichen die Risiken wirtschaftlicher Abhängigkeiten von möglichen geopolitischen Rivalen. Zwar ist die Wahrscheinlichkeit einer vergleichbaren Konfrontation in Ostasien derzeit noch umstritten, doch wäre das mögliche Szenario einer militärischen Operation Chinas gegen Taiwan und anschließende Sanktionsmaßnahmen für Deutschland weitaus kostspieliger und mit deutlich umfangreicheren wirtschaftlichen Folgen verbunden als der Ukrainekrieg. Deutsche Handels- und Investitionsvolumina liegen in China um knapp ein Vierfaches höher als in Russland. Und während sich die Verwundbarkeit gegenüber Moskau in einer massiven Abhängigkeit im Energiebereich zeigte, liegen mit Blick auf China erhebliche Klumpenrisiken vor allen Dingen in einzelnen Industriesparten (Automobile, Chemie, Maschinenbau) sowie beim Import seltener Erden, die gerade im Hochtechnologiebereich elementarer Bestandteil von Wertschöpfungsketten sind. Darüber hinaus ist Deutschland auf Grund seiner exportorientierten Wirtschaft auch ohne kriegsbedingtes hartes „Decoupling“ von China wie kaum ein anderes Land anfällig für einen sich verschärfenden geoökonomischen Konflikt zwischen den Vereinigten Staaten und der Volksrepublik. China fordert mit seiner wirtschaftlichen Macht und einem zunehmend-selbstbewussten Auftreten auf internationaler Bühne den globalen Führungsanspruch der USA heraus. Washingtons erklärtes Politikziel ist es seit einigen Jahren, den Aufstieg Pekings als einen politischen, wirtschaftlichen und militärischen Rivalen zu verhindern. Gerade weil China von Jahrzehnten der Internationalisierung und Liberalisierung des Handels profitiert hat, rücken nunmehr wieder aktive Industriepolitiken bis hin zu Protektionismus in den Fokus von politischen Entscheidungsträgern, allen voran in Washington. Diese Umstände haben die Bundesregierung veranlasst, eine umfassende und ressortübergreifende China-Strategie zu erarbeiten. Nach der eher pragmatischen, interessenorientierten und auf Dialog ausgerichteten Politik der letzten zwei Jahrzehnte streitet die Ampel-Koalition nun um neue Grundsätze. Auch wenn China nach wie vor als wichtiger Partner beispielsweise im Kampf gegen den Klimawandel gesehen wird, hat sich ein Grundkonsens zur Diversifizierung herausgebildet: Es geht darum, bestehende Abhängigkeiten zu verringern, stärker auf gleiche Wettbewerbsbedingungen zu setzen und einen fairen Marktzugang (level playing field) zu erwirken. Nach der „Zeitenwende“, bedingt durch den russischen Krieg in der Ukraine, schließt dies die Auseinandersetzung mit Szenarien einer substanziellen Einschränkung des Chinageschäfts mit ein. Das grundsätzlich hohe Interesse am Wirtschaftsaustausch mit China bleibt zwar bestehen, und eine umfassende Entkoppelung ist politisch nicht beabsichtigt, jedoch sollte die vehement vorgetragene Forderung nach einem stärkeren Eintreten für deutsche Interessen als ein wichtiger Schritt hin zur neu-gedachten Rolle Deutschlands in der Welt verstanden werden. Die Bundesregierung erwartet dabei klar die Mitarbeit deutscher Unternehmen. Deren übergeordnetes Ziel sollte es sein, ihr Geschäft so aufzustellen, dass es im Ernstfall – also zum Beispiel bei westlichen Sanktionen gegen China infolge eines Angriffs auf Taiwan – nicht zu Stillstand, Pleiten und massivem Wohlstandsverlust in Deutschland kommt. Wurde China in Berlin und Brüssel also zuletzt gleichermaßen als “Partner, Wettbewerber und systemischer Rivale” wahrgenommen, so verschiebt sich der Fokus nunmehr hin zu den letzten beiden Kategorien – eine Annäherung an die in den USA dominante Sichtweise. Die bisher bekannten Elemente der deutschen China-Strategie lassen dabei die Tendenz erkennen, dass die Politik hier auch die Wirtschaft stärker in die Pflicht nehmen will. Dies gilt für das Reduzieren einseitiger Abhängigkeiten ebenso wie für das aktive Erschließen alternativer Märkte, ein deutlicherer Fokus auf Ressourceneffizienz sowie das mögliche Einführen neuer Quoten für Recycling bzw. den Einsatz von Rezyklaten. Diskutierte Ideen umfassen zum Beispiel eine erhöhte Berichterstattungspflicht zum Chinageschäft, das regelmäßige Durchführen von Stresstests, höhere Auflagen zum effektiven Unterbinden von Wissensabfluss sowie eine weitaus restriktivere Handhabung der politischen Begleitung deutscher Firmenprojekte in China. Peking hat die in Berlin zirkulierenden Vorschläge bereits kritisiert und arbeitet an möglichen Gegenmaßnahmen, während Washington seinen Kurs weiter verschärft – mit Auswirkungen auf alle Firmen, die sowohl auf dem US als auch dem chinesischen Markt tätig sind. Deutschland droht zwischen die Fronten der amerikanisch-chinesischen Rivalität zu geraten – was es wiederum für Unternehmen unerlässlich macht, ihre wirtschaftlichen Risikoabwägungen um politische Gesichtspunkte zu erweitern. Die Strategie der Bundesregierung betont dabei immer wieder, dass eine effektive China-Politik nur im europäischen Rahmen funktionieren kann. Gleichzeitig ist es jedoch bereits heute im EU-Rahmen schwierig, sich der Wirkungsmacht von US-Sekundärsanktionen zu entziehen (siehe Iran). Hinzu kommt, dass einzelne EU-Mitgliedstaaten wirtschaftlich noch stärker von der Volksrepublik abhängig sind als die Bundesrepublik, beispielsweise Finnland, Tschechien, Portugal und Schweden. Chancen sieht die Bundesregierung wiederum in der Ende 2021 lancierten EU-Konnektivitätsstrategie “Global Gateway”, die sich mit einem Volumen von bis zu 300 Mrd. Euro als Alternative zur chinesischen Belt and Road Initiative (BRI) versteht. Bis 2027 wollen die EU und ihre Mitgliedstaaten gemeinsam mit den europäischen Entwicklungsbanken und dem Privatsektor weltweit Projekte für hochwertige, nachhaltige Infrastruktur in den Bereichen Digitales, Energie, Transport, Gesundheit, Bildung und Forschung initiieren. Die Wirtschaft soll dabei über eine Business Advisory Group eingebunden werden und es besteht die Aufforderung, dass deutsche Unternehmen geeignete Projekte identifizieren und mögliche paneuropäische Umsetzungskonsortien vorschlagen. China als schwer kalkulierbares unternehmerisches Risiko Neben den umfangreichen deutsch-chinesischen Handels- und Investitionsbeziehungen bestehen insbesondere im Rohstoffbereich kritische Abhängigkeiten, die für die Bundesregierung von Bedeutung sind. Die China-Strategie der Bundesregierung erkennt, dass entsprechende Lieferausfälle weitreichende Folgen für die Produktionsfähigkeit in Deutschland hätten, allen voran in der chemischen Industrie, der Elektrobranche und bei metall-intensiven Produktionsketten. Bei Rohstoffen und Seltenen Erden sind kritische Abhängigkeiten von China sogar noch stärker ausgeprägt als bei Industrieprodukten. Daneben führt die enorme Bedeutung des Chinageschäfts in einzelnen Branchen – wie zum Beispiel im Automobilsektor – zu erheblichen Klumpenrisiken mit Blick auf Umsatz, Gewinnbeitrag und Anteil an Forschung und Entwicklung. Chinas dynamischer Markt wird auch weiterhin von maßgeblicher Bedeutung für die deutsche Wirtschaft sein. Es gibt jedoch neben der eigenen Abhängigkeit und möglichen Sanktionsszenarien auch eine Reihe von Risiken im Land selbst zu beachten. Hierzu gehören strukturelle Herausforderungen samt einem sich – trotz kurzfristiger Erholung dank dem absehbaren Ende der Covid-Pandemie – abschwächenden Wachstum, eine ausufernde staatliche Kontrolle sowie eine zunehmende Nationalisierung der Wirtschaft. Zu den strukturellen Problemen, welche die langfristige wirtschaftliche Entwicklung des Landes nachhaltig bestimmen, gehört dabei die rapide Alterung der Gesellschaft, die erheblichen Druck auf die nur schwach ausgeprägten sozialen Sicherungssysteme ausübt. Darüber hinaus kommt Chinas schulden-gestütztes, investitionsgetriebenes Wachstumsmodell mit geringen Produktivitätszuwächsen vermehrt an seine Grenzen. Perspektivisch dürfte das chinesische Wirtschafts­wachstum nur noch in Ausnahmefällen jenseits der fünf Prozent liegen und sich den westlichen Märkten angleichen. Dementgegen stehen lediglich die chinesischen nominalen privaten Konsumausgaben und Investitionen, die sich bis 2030 durchaus verdoppeln könnten. Inwieweit dies als alternativer Wachstumsmotor wirken kann, hängt vor allem von den Reformbemühungen bzw. Öffnungstendenzen der chinesischen Partei- und Staatsführung ab. Prognosen der Weltbank für 2050 erwarten eine chinesische Pro-Kopf-Wirtschaftsleistung je nach Entwicklungsszenario von ca. 34.000 bis 56.000 US-Dollar. Zum Vergleich: Die Werte für die USA bzw. Deutschland liegen bei ca. 87.000 bzw. 82.000 US-Dollar. Zusätzlich sieht sich die chinesische Regierung massiven Herausforderungen bei der Energieversorgung gegenüber, die im letzten Jahr nur durch zusätzliche Kohleverbrennung entschärft werden konnten. Auch die noch immer vorhandene Immobilienkrise, ein außer Kontrolle geratenes System von Schattenbanken, enorme Umweltschäden sowie eine stetig wachsende Kluft zwischen Arm und Reich haben erhebliche Implikationen für den Wirtschaftsstandort China. Die Präsidentschaft Xi Jinpings stellt darüber hinaus in vielerlei Hinsicht eine Zäsur in der chinesischen Politik dar. Sie bedeutet nicht nur die Abschaffung des Prinzips kollektiver Führung, sondern deutet auch auf eine Abkehr vom bisherigen Fokus wirtschaftlicher Entwicklung hin. Die bislang geltende, stille Vereinbarung zwischen der Kommunistischen Partei Chinas und dem Volk zur Einschränkung politischer Freiheitsrechte im Gegenzug für stetig steigenden Wohlstand scheint vermehrt aufgehoben. Hierauf deutet vor allem das Einschwören auf schwierigere Zeiten hin, also Umstände, die dem chinesischen Volk Entbehrungen abverlangen werden und nationalen Zusammenhalt erfordern. Die chinesische Führung weiß, dass sich die Wachstumsraten der Vergangenheit wohl nicht wiederholen lassen und sieht somit die ökonomische Legitimation für autokratische Führung und innere Stabilität gefährdet. Xis Antwort ist eine noch umfassendere Steuerung der Wirtschaft und bisweilen ausufernde Eingriffe staatlicher Behörden in wirtschaftliche Belange. Schon länger verfolgt China ein hybrides Wirtschaftsmodell, welches plan- und marktwirtschaftliche Elemente kombiniert. Die schon in der Vergangenheit zentrale Rolle von Staatsunternehmen wird jedoch zunehmend größer, und die kommunistische Partei hat wiederholt klargestellt, dass sämtliche wirtschaftliche Aktivität vom guten Willen der politischen Führung abhängt. Auch die deutsche China-Strategie merkt an, dass die Wirtschaftspolitik des Landes langfristig und strategisch ausgerichtet sei und vorrangig dem Regimeerhalt verpflichtete Ziele verfolge. Vor diesem Hintergrund forcieren Industriestrategien wie “Made in China 2025” eine weitgehende wirtschaftliche und technologische Autarkie, verbunden mit globaler Industrie­führerschaft insbesondere bei Zukunftstechnologien und der Verbesserung militärischen Fähigkeiten. Die gezielte Akquise ausländischer Unternehmen und Spezialisten in technologischen Schlüsselbereichen nimmt dabei eine zentrale Stellung ein und ist fast immer mit Joint-Venture-Auflagen, Lokalisierungsanforderungen und erzwungenen Technologietransfers verbunden. Insofern ist China grundsätzlich noch immer nicht an einer offenen Wirtschaft interessiert; vielmehr sind ausländische Firmen und deren Investitionen nur willkommen, sofern sie für die eigenen Entwicklungsambitionen relevant sind. Dabei hat sich ein Modell chinesischer Industriepolitik herausgebildet, bei dem auf ein aktives Anwerben von Investitionen und Technologien aus dem Ausland eine Transformationsphase zur Stärkung der eigenen Kapazitäten folgt, die, falls erfolgreich, in staatlich unterstützte Verdrängung aus dem chinesischen Markt mündet, sobald die eigenen Unternehmen Technologieparität erworben haben. Etwaige Lokalisierungsstrategien ausländischer Firmen können somit keinesfalls der Politisierung des Geschäftsumfeldes entgehen, sondern ermöglichen dieses vielmehr. Solange ausländische Akteure auf Grund ihrer Qualität und ihres Know-hows im chinesischen Markt unersetzlich sind, werden sie dort auch weiter Geschäfte machen können. Die vielversprechendste und nachhaltigste Taktik gegen Marktverdrängung ist also eine Innovations- und Technologieführerschaft deutscher Unternehmen, die deshalb nicht nur geschützt sondern durch strategische und umfangreiche Investitionen vielmehr ausgebaut werden sollte. Regionale und geopolitische Verwerfungen sowie gefährliche Abhängigkeiten Die chinesische Regierung hat in den vergangenen Jahren vermehrt alternative Strukturen zu den Bretton Woods- Institutionen (Weltbank und Internationaler Währungsfonds) auf internationaler Ebene etabliert. Die Asian Infrastructure and Investment Bank mit Sitz in Peking setzt sich beispielsweise für wirtschaftliche und soziale Entwicklung im asiatischen Raum ein und ist dabei inzwischen zur zweitgrößten Entwicklungsbank der Welt aufgestiegen. Pekings Belt and Road Initiative fokussiert sich darüber hinaus seit 2013 auf Infrastrukturprojekte in Asien, dem Nahen Osten und Europa. Chinas Engagement in Afrika wiederum besteht nicht nur aus Kreditvergaben, sondern auch aus umfangreichen Rohstoffpartnerschaften, von denen in erster Linie chinesische Unternehmen profitieren. Für die chinesische Förderpolitik spielen Verschuldungsfragen dabei eine zentrale Rolle. Laut Weltbank ist Peking inzwischen der größte offizielle Kreditgeber für Entwicklungsländer und hält bereits einen erheblichen Teil der knapp 700 Milliarden US-Dollar Auslandsschulden afrikanischer Staaten. Dabei setzt die Volksrepublik überwiegend auf eine bilaterale Mittelvergabe, was ihr mehr (politischen) Einfluss auf die Schuldner bringt. Angesichts einer dramatischen Zuspitzung der Schuldenkrise in Afrika kooperiert China neuerdings mit anderen staatlichen Gläubigern, zum Beispiel mit dem informellen Pariser Club westlicher Kreditgeber sowie im Kreise der G20. So konnte vor nicht allzu langer Zeit ein Entschuldungsdeal über 1,4 Milliarden US-Dollar mit Sambia erreicht werden. Eine grundsätzliche Abkehr von der Politik der Schuldenfalle, der zufolge Entwicklungsländer in Zahlungsschwierigkeiten Peking im Gegenzug für einen Schuldenerlass ihre kritische Infrastruktur wie Häfen oder Flugplätze überschreiben müssen, ist aber noch nicht zu erkennen. Darüber hinaus versteht sich China immer mehr als Hegemonialmacht in Ostasien, was primär das Verhältnis zu Japan und Südkorea prägt. Zwar sind beide Länder wirtschaftlich eng mit der Volksrepublik verflochten, jedoch sicherheitspolitisch mit den USA verbündet. Daneben will der Zusammenschluss Südostasiatischer Staaten (ASEAN) wirtschaftliche Herausforderungen und ungelöste Regionalkonflikte meistern sowie weitere ökonomische Integration fördern. Die China-Strategie der Bundesregierung sieht hierin ein mögliches Gegengewicht zu Chinas wachsendem Einfluss und somit auch Diversifizierungsperspektiven für die deutsche Wirtschaft. Dennoch ist die Volksrepublik nach wie vor der wichtigste Handelspartner für acht von zehn ASEAN-Mitgliedstaaten (mit Kambodscha und Thailand als Ausnahmen) und kann seinen erheblichen Einfluss somit weiterhin auch politisch geltend machen. Der Rückzug der USA aus den Verhandlungen zu einem transpazifischen Handelsabkommen (TPP) hat nicht nur Washingtons Einfluss im indopazifischen Raum geschwächt. Er hat auch China nachhaltig gestärkt, da Peking als dominante Wirtschaftsmacht seinerseits nun über eine Mitgliedschaft verhandelt. Neue US-geführte Initiativen wie der Indo-Pazifische Wirtschaftsrahmen können dem nur wenig entgegensetzen, da Washington aus innenpolitischen Gründen mittelfristig wohl keinen erleichterten Marktzugang anbieten kann. Auch in Südamerika, Afrika und im Nahen Osten machen strategische Investitionen in Infrastruktur, diverse Rohstoffpartnerschaften und umfangreiche Kreditverträge China zu einem globalen Player. Entsprechend tun sich die Vereinigten Staaten schwer, Anti-China Allianzen zu schmieden. Die meisten Länder wollen sich nicht zwischen amerikanischen und chinesischen Einflusszonen entscheiden, und selbst enge Verbündete der USA, ob in Europa oder am Persischen Golf, in Australien oder Lateinamerika, pflegen intensive Beziehungen zu Peking. Dass die Weltmacht China offiziell immer noch darauf besteht, nach internationalen Standards ein Entwicklungsland zu sein, ist den Vereinigten Staaten und auch europäischen Ländern schon länger ein Dorn im Auge. Peking sichert sich dadurch günstige Kredite und kommt in den Genuss von Ausnahmeregeln bei Klimaschutzbemühungen und der WTO. Deshalb plant die Bundesregierung, China bezogene KfW-Kredite auslaufen zu lassen und internationale Entwicklungshilfeprojekte neu zu evaluieren (selbst mit Blick auf Klimaschutzmaßnahmen), was durchaus auch in diesem Bereich aktive Unternehmen betreffen wird. Tatsächlich ist Chinas Engagement beim Kampf gegen den Klimawandel – wie bei anderen Ländern auch – industriepolitisch motiviert. Chinesische Unternehmen produzieren bereits heute weltweit mehr als 70 Prozent aller Solarpaneele und etwa die Hälfte der Windturbinen und Elektroautos. Darüber hinaus ist die Volksrepublik der weltweit größte Produzent von Batterien und Wasserstoff, was zwar auf der einen Seite zur Massenverfügbarkeit bestimmter grüner Technologien auf dem globalen Markt führt, jedoch gleichzeitig deutsche Unternehmen enorm unter Druck setzt. Denn mit den oftmals stark subventionierten Produkten auf dem Weltmarkt zu konkurrieren ist ohne staatliche Unterstützung nicht zu leisten. Diesbezüglich diskutiert die China-Strategie im Rahmen so genannter wichtiger Projekte von gemeinsamem europäischem Interesse (IPCEI) mögliche Subventionsregime, die gezielte finanzielle Unterstützung für die Entwicklung strategisch relevanter Technologien und die Schaffung entsprechender industrieller Kapazitäten bereitstellen könnten. Mit Hilfe von Industriepolitiken wie dem Inflation Reduction Act und der umfassenden Halbleiter-Gesetzgebung versucht Washington, Produktionen und Innovationen zurück auf den amerikanischen Kontinent zu holen. Ziel ist es, eigene Abhängigkeiten zu vermindern und gleichzeitig chinesisches Wachstum zu schwächen, um so eine Vormachtstellung der Volksrepublik in wirtschaftlichen und militärischen Bereichen zu verhindern. Dies ist besonders für den Technologiesektor relevant. Dass die Regierung in Washington dabei auch nicht vor diplomatischem und wirtschaftlichen Druck auf verbündete Staaten in Europa zurückschreckt, zeigt das Beispiel der niederländischen Holding ASML, die daran gehindert wurde, neue Maschinen zur Chipherstellung nach China zu exportieren. Hierbei wird es immer wahrscheinlicher, dass auch deutsche Hochtechnologiefirmen zwischen die Fronten geraten und sich Druck aus Washington oder Peking ausgesetzt sehen. Amerikanische Entscheidungsträger dürften in diesem Zusammenhang auch nicht vor der Implementierung etwaiger Sekundärsanktionen oder exterritorialer Exportbeschränkungen für Unter­nehmen zurückschrecken, die nach wie vor beide Märkte bedienen wollen. Inwiefern die Bundesregierung hier etwaige Schutzmechanismen plant, wird in den bisherigen Entwürfen der China-Strategie nicht diskutiert. Es gibt darüber hinaus Berichte, dass die US-Regierung an einem Positionspapier arbeitet, welches nationale Sicherheitsüberprüfungen für ausgehende Investitionen nach China skizziert. Sollte der Kongress eine derartige Politik ratifizieren, wäre das ein beispielloser Schritt, der sehr schnell auch ausländische Unter­nehmen betreffen kann. Ausblick Politisch und wirtschaftlich gesehen führt kein Weg an einer Diversifizierungsstrategie im europäischen Kontext vorbei. Initiativen wie die EU Global Gateway sind somit eine Gelegenheit für deutsche Unternehmen, neue Märkte zu erschließen und Abhängigkeiten von China zu reduzieren. Auch die Empfehlung, dass die zukünftige Handels- und Wirtschaftspolitik gegenüber der Volksrepublik auf eine Stärkung der Wettbewerbsfähigkeit und Resilienz sowie einer technologischen Souveränität Deutschlands und der EU setzen sollte, ist essenziell. Dasselbe gilt für den Vorschlag, den OECD-Konsensus zur Exportkreditfinanzierung zu flexibilisieren, um europäischen Unternehmen mehr Spielraum im Wettbewerb gegen chinesische Konkurrenten zu ermöglichen. Von entscheidender Bedeutung wird eine mögliche Positionierung der Bundesregierung im sich intensivierenden amerikanisch-chinesischen Großmachtkonflikt sein – nicht zuletzt mit Blick auf etwaige US-Sicherheitsgarantien. Ob nationaler Vereinigungswille auf chinesischer Seite, das Ende der Strategischen Ambiguität bezüglich Taiwans auf amerikanischer Seite oder die stetig wachsende Gefahr von Fehleinschätzungen – sie alle verdeutlichen die Gefährlichkeit der Lage. China gibt sich nicht mehr mit einer Zuschauerrolle im internationalen System zufrieden, während die USA ihre nationale Sicherheit auch durch ihre technologische und militärische Vormachtstellung im globalen Kontext definieren. Dass deutsche Unternehmen im Ernstfall, also bei einem militärischen Angriff Chinas auf Taiwan, durch Sanktionen große Teile ihres Chinageschäft verlieren können, ist längst keine Fiktion mehr. Unabhängig von einer möglichen Eskalation ist es gerade der Hochtechnologiebereich, in dem Deutschland auch zu Friedenszeiten droht, zwischen die chinesisch-amerikanischen Fronten zu geraten. Obwohl in diesem Konflikt nun vermehrt auch moralische Gesichtspunkte bemüht werden, geht es vor allen Dingen um amerikanische Kerninteressen, die mittel- und langfristig vielleicht nicht mehr ganz den deutschen oder europäischen Zielen entsprechen. Washington möchte unter allen Umständen vermeiden, dass sich die chinesische Aufholjagd im Bereich der neuen Technologien fortsetzt. Das Problem ist, dass genau dort die Wachstumsmärkte der Zukunft liegen – auch für deutsche Unternehmen.

Executive Summary Global trade in goods, services, and capital has recovered to pre-pandemic levels, but investment increasingly flows between geopolitical allies rather than geographically close countries. “Decoupling” has so far been concentrated on advanced rather than regular products, though US sanctions against China have begun to reshape entire segments of the global economy, most notably the semiconductor industry. Europe, still mostly reliant on open markets, is caught between an increasingly protectionist Washington and a Beijing that is becoming more assertive in its own practices. Implications for International Business The “friend-shoring” trend is expected to be costly, but the push for increased economic integration between partners also brings business opportunities with new trade agreements and government support to develop new supply chains. As the United States adopts new sanctions and export controls, firms need to allocate more resources to ensure compliance, to beaware of continued disruption risks in China and hence to explore alternatives in emerging markets. State of Play Open markets under pressure Globalization is proving surprisingly resilient. Despite a pandemic, a war in Ukraine, and a looming recession, the global exchange of goods, services, and capital has recovered to pre-pandemic levels. For instance, by mid-2022, the global volume of trade in goods had increased by 10 percent compared to the end of 2019. Foreign direct investment, meanwhile, rose to $1.58 trillion in 2021, an increase by 64 percent relative to the low levels of 2020, the first year of Covid-19. Forecasts suggest that international flows will continue to grow, albeit at a slow pace. At the same time, the escalating rivalry between the United States and China is starting to pose real challenges to the openness of the global economy. In recent years, the world’s two biggest economies have become locked in a battle to dominate global politics, which entails the use of far-reaching sanctions, trade restrictions, and efforts to try to win over countries in Europe and elsewhere to their side. If implemented at grand scale, the “decoupling” of the American and Chinese econo­mies may divide certain segments of the world market into geopolitical blocs. An IMF study showed that foreign direct investment increasingly flows between countries that are allies rather than those that are geographically close, even if trade does not appear to follow the pattern. Western sanctions in response to the war in Ukraine have contributed to the trend by strengthening ties between democracies and pushing China and Russia closer together. However, most countries, including regional powers like Brazil, South Africa, and Saudi Arabia, are unwilling to position themselves firmly on either side. Key Issues The US-China rivalry is contagious The United States uses powerful sanctions to contain China’s rise to superpower status. In October 2022, Washington unveiled expansive new export controls to restrict Chinese access to advanced computing chips and chipmaking tools. More such measures are expected to follow soon in areas such as quantum computing, artificial intelligence, and biotechnology, as US policymakers now openly declare that they want to “maintain as large of a lead as possible” in critical technologies. China, meanwhile, is trying to find new ways to access the most advanced chips, including by investing in domestic industries. It also seeks to expand its circle of friends in Africa and Latin America through large loans and infrastructure projects and elevated its trade with Russia in terms of technological and military equipment. To varying degrees, major powers in Europe and East Asia share America’s concern about China’s global ambitions. To protect themselves from supply disruptions, tech­nology transfers, and spying, they have begun scrutinizing trade, investment, and procurement rules as well as launching initiatives to increase their self-sufficiency and diversify their supply chains. The Netherlands and Japan, for instance, recently introduced export controls to prevent China from buying the machines needed to manufacture the most advanced chips. Also, the US-led Chip 4 Alliance with Japan, South Korea, and Taiwan aims to create a “democratic semiconductor supply chain” . At the same time, American protectionism makes it hard for the EU and its member states to fully side with Washington. The Inflation Reduction Act is a major sticking point, as its extensive subsidies for green technology and its domestic manufacturing requirements lure European companies to relocate significant operations to the United States. China, meanwhile, has in recent months advertised a more welcoming business environment for tech companies and foreign investors. During French President Emmanuel Macron’s trip to Beijing earlier this month, companies like Airbus, Alstom, and CMA CGM concluded major deals with Chinese counterparts. However, China’s state-directed economy is unlikely to open up anytime soon, as self-sufficiency remains one of the government’s major goals. Against this backdrop, the EU is committed to “de-risking” rather than “decoupling” its relations with China – a more-than-semantic variance that will likely appear also in Germany’s upcoming China strategy. This means to diversify supply chains through initiatives like the Critical Raw Materials Act that the European Commission proposed in March and is currently in the EU’s legislative process. Another important and soon-to-be-adopted tool to safeguard Europe’s economic security is the Anti-coercion Instrument to deter Chinese punitive tariffs against EU countries. These measures underline the importance of the EU-US Trade and Technology Council as the main body to coordinate such initiatives. As Washington insists on wider restrictions, the Europeans may ultimately find it to be in their interest to join US efforts to curb China’s access to highly advanced technology. That said, the EU would do well to insist that the latter are balanced by increased transatlantic openness, not protectionism. Decoupling carries risks for businesses So far, economic security initiatives such as export controls and investment screening have largely focused on cutting-edge technology, critical infrastructure, and scarce raw materials needed for the green transition. US export controls on semiconductors, for instance, only target the top percent of the most advanced chips in the nanometer range. Over time, however, trade in less advanced goods may be drawn in too. For example, China has used extensive restrictions on a range of regular products, including wine, beef, timber, and coal, to punish countries like Australia and Lithuania for opposing Beijing on specific issues. Chinese consumer boycotts have targeted American and European companies in the apparel, automotive, and food and beverages sectors. While China’s economic coercion is alarming, the United States remains the dominant geoeconomic power, be it through advanced technological products and services, or via financial transactions through the dollar-based system. US sanctions are therefore often very costly for targeted companies and countries, and global firms concerned about decoupling have to keep up with US legislation. This includes monitoring Foreign Direct Product Rules, which prohibit certain exports of products containing American technology, software, or equipment, such as tools for chipmaking or the development of supercomputers. As trade between adversaries becomes more restricted, many countries’ eagerness to enhance their economic security may also mean more exchanges between allies. The deterioration of EU-China relations seems to have accelerated European efforts to conclude free-trade agreements with Asian countries such as Indonesia, India, and Australia and to reinvigorate talks with Mercosur, opening up new markets for businesses. Meanwhile, the EU’s raw materials and global infrastructure initiatives are expected to strengthen ties with third countries, including in the mining industry. As governments strive to develop “safer” supply chains, projects in emerging markets that previously seemed too inefficient, costly, or distant may become attractive business opportunities. Savvy companies should be able to profit.

Executive Summary Brazil and Argentina are strategically important to Europe, both as trade partners and as weighty representatives of the Global South. Despite domestic challenges, Brazil, like Argentina, is trying to exert its influence on global challenges such as climate change, food, and energy security. Brazil can take a leading global role in renewable energy sources while Argentina’s lithium reserves could cover 20 percent of global demand in 2030. Implications for International Businesses Brazil strongly engages in the production of green hydrogen and domestic demand is expected to take up about 60 percent of the total supply. This leaves room for energy exports up to $20 billion. Thyssenkrupp AG’s Nucera subsidiary together with Brazilian chemical company Unigel SA will open the country’s first industrial-scale green hydrogen plant by the end of 2023, with capacity set to grow from 60 MW to 240 MW in a second phase. The ratification of the EU-Mercosur trade deal would give European companies access to a so far highly protected market of over 260 million people. State of Play Global balancing act running into local challenges Brazil and Argentina face different domestic challenges. Both are similarly trying to stay out of the West’s fallout with Russia over the invasion of Ukraine, or the emerging global rivalry between a US-led alliance and a China-dominated bloc. Together with a majority of other Latin American countries, they currently have left-leaning governments, brought to power by popular frustration with their predecessors’ pandemic policies and overall economic stagnation. Their relative instability makes them open to outside investments, including from Europe, in areas where their companies can in turn increase global exports to generate hard currency. Increased energy and food prices worldwide, as well as Russia’s war against Ukraine disrupted Brazil’s recovery following the COVID-19 crisis. As the government had to temporarily extend federal tax breaks on fuels, it also began to promote investments around untapped deposits of fertilizers like potash to maintain the country’s status as the world’s third largest agricultural exporter. President Luiz Inácio Lula da Silva, inaugurated in January amid a deeply polarized socio-political landscape, now seeks to boost economic growth by promoting partnerships that assure joining value chains that help re-industrializing the country. For Argentina, the war further deepened an economic crisis marked by high annual inflation (already at 53.8 percent in 2019, i.e., before the pandemic) and a fiscal adjustment program administered by the International Monetary Fund (IMF). Energy import values increased by 120 percent, and the 80 percent price increase on imported fertilizer coupled with a record drought have affected agriculture and cattle exports. Ahead of an election in the fall, Argentina seeks financial and infrastructure assistance to exploit its available energy and mining sources to stabilize its economy. Key Issues What makes region a geopolitical partner for the EU In its quest to transition towards climate neutrality, the EU needs new partnerships for non-fossil energies. At the same time, it is diversifying geopolitical risks away from its dependence on Russia (until the war) and now increasingly on the Middle East. This makes Argentina and Brazil, two powerhouses for the green transition, important partners. Moreover, Latin America is a region with the lowest risk of interstate wars, along with the rest of the Americas. In the past, Europe’s impulse was to combine trade and investment with ambitious environmental, labor, and social standards, such as with the signing of the EU-Mercosur agreement in 2019. Now, ‘winning’ key green tech exporters not just for business purposes but also as strategic partners in a geopolitically contested world is crucial for the EU. The United States follows a similar logic of investing in green tech and looking for allies, thus presents itself as a competitor for the EU in terms of trade while being a partner at the geostrategic level. For example, it formed the Minerals Security Partnership with like-minded countries from Europe and Asia to ensure access to critical minerals, thus countering China’s dominance in global supply chains. Source countries, in turn, would receive loan guarantees or debt financing for mining projects. So far, however, Argentina and Brazil have refused to join the initiative, just as they have rejected Washington’s offer to replace ageing military equipment with modern American weaponry if donated to Ukraine. On his recent visit to China, President Lula went even further, asking both the US and Europe not to “encourage” the war through arms shipments. He later added a call for a “peace group” to be established without the warring partners and their supporters to mediate an end to the hostilities, basically meaning Brazil, China and other (unnamed) countries from the Global South. China, in turn, became Argentina’s and Brazil’s first trading partner in 2017 and 2009, respectively (even though the United States remains their biggest foreign investor). Both countries have been elevated to comprehensive strategic partners, the highest level that Beijing awards to a third country. Since 2005, China has financed infrastructure and energy projects there valued up to $48 billion, and Argentina became a member of the Belt and Road Initiative in 2022. However, two factors have led to a reappreciation of Beijing’s role: First, the dramatic decline of Chinese lending to Latin America and the Caribbean over the past decade, i.e., from $34.5 billion in 2010 to $807 million in 2022, though rebounding as of late. Second, rising concerns – especially in Brazil – that China’s buying up of natural resource-based products came to the detriment of its industries. This opens the door for Europe and a revived EU-Mercosur trade agreement focusing on cooperation around the green transition. Ultimately, being on good terms with large powers such as China or Russia helps Brazil and Argentina balance the United States, which is why the two countries prefer not to join a Western-led alliance to isolate Russia. In comparison, from a political point of view, Europe is seen as less overbearing and thus, less invasive. Given the EU’s more limited geopolitical clout, signing a free trade deal with the EU is far less political costly for both countries than any hypothetical trade deal with Washington. Green transition, trade, and money – the geo-economic side of the relationship Europe’s renewed interest in the region, particularly in Argentina and Brazil, is not merely driven by geopolitical considerations, but also by the requirements of the green transition. Both countries hold an abundance of minerals that are critical especially for the electrification of transports, such as lithium (Argentina is the fourth-largest producer), nickel (Brazil has the world’s second largest reserve), and rare earth elements. Other energy opportunities include the production of liquefied natural gas and hydrogen in Argentina, which boasts the second-largest shale gas reserve in the world. In Brazil, renewables like wind and solar as well as the production of green hydrogen are frontrunners, propelling the country to the world’s top ten producers of solar energy. This generates investment opportunities for European companies in steel and automobile industries, software, mechanical engineering, solar technology, waste management, and startups. Investment risks, in turn, include a weak rule of law, competition with Chinese mining companies (42,29 percent of Argentina’s lithium exports go to China), as well as local state-owned enterprises like Brazilian energy giant Petrobras that may engage in unfair competition and a high risk of sovereign debt default. The envisaged trade agreement with the EU with the Mercosur economic and political club uniting Argentina, Brazil, Uruguay, and Paraguay would be the largest such deal in latter’s history. It would give the group a boost, especially given that its actual economic integration has lagged expectations (despite a combined GDP of roughly US$2.2 trillion in 2021) while its effect on interstate peace has been considerable. In fact, the EU and Brazil are making progress on an addendum tackling sustainable development that would lift European countries’ resistance and move towards the agreement implementation. Given Argentina’s upcoming election, its stance is more delicate, so ratification – and therefore the deal’s implementation at the bilateral level – may be delayed. However, it has to be noted, that the most promising political candidates for Argentina’s election are less protectionist than the incumbent. The same is true for both countries’ bid to join the OECD club of mostly rich countries over the coming years, whose framework provides protection to European companies’ investments and fosters pro-market reforms. Most recently, Argentina and Brazil have floated the idea of monetary cooperation by establishing a local currency system between the two countries. This is a payment agreement that seeks to foster intra-regional trade through a clearing system run by the two central banks. If implemented, this update will help businesses already established in both countries to avoid capital and import restrictions currently in place in Argentina. Especially the automotive sector, valued at $6.7 billion and contributing 22 percent of exports from Argentina to Brazil and 35 percent the other way in 2020, stands to benefit from this, and with-it European carmakers such as Volkswagen, Mercedes Benz, and Renault.

Executive Summary Russia, the once-dominant supplier of oil and gas, has left the European market, with governments coupling massive subsidy programs with enhanced decarbonization targets to buffer the shock. Major supply-side contingencies for Europe include tight LNG markets as well as domestic climate policies restricting the continent’s ability to secure long-term deliveries of fossil fuels. Europe’s crisis management also entails geopolitical risks, as keeping energy prices affordable in developing countries will be crucial to maintain their support for Europe’s Russia policy. The global fallout from the energy crunch has led to the clean industrial transformation gaining speed, not least considering an emerging green race with the US, with knock-on effects for supply chain geographies across the EU. Implications for International Businesses The manufacturing and energy-intensive sectors will see a business environment marked by persistent market volatility as fossil upstream investment is bearish and renewable capacity development is trailing needs. Companies need to brace for a more interventionist approachto energy market regulation, both in light of the security premium of swift decarbonization and as the Ukraine crisis revealed the political costs of lopsided industry choices regarding their energy supply structures. The EU will put a high emphasis on (green) industrial policy, possibly at the expense of pro-market and competition policy. This may offer opportunities for businesses investing in clean solutions but alter investment conditions. State of Play A fundamental shift in energy geographies 2022 marks a fundamental shift in the European energy geography. Russia, the once-dominant supplier in oil and gas, has essentially left the EU market. After Moscow unilaterally cut gas supplies, most of the formerly 150 billion cubic meters of annual European imports from Russia were replaced by globally sourced liquified natural gas (LNG) and additional intake from Norway and other suppliers, whilst the remainder is savings. The EU, in turn, banned the import of Russian coal, oil, and oil products. Until Russia withdraws from Ukraine and ends the war, and possibly beyond, the Russian-EU energy ties built over half a century are severed. Europe is literally finding itself between a rock and a hard place, having to manage the fallout whilst rapidly changing supply structures in a tight market environment. This shift has come at a cost. With wholesale gas prices at times above €300/MWh, industry and the manufacturing sector responded by fuel switches and savings as well as by replacing energy intensive production through imports, such as ammonia. A flurry of policy initiatives – centrally here the REPowerEU plan – were put in place to reduce energy imports from Russia and to support industrial decarbonization, energy efficiency and fuel switch. Member state-level subsidy programs, albeit highly unequal in terms of scope and volume, started to shield households and industries from high energy costs – a welfare loss of some estimated EUR 800 billion of spent or pledged public money. Significant new LNG import infrastructure, by some estimates amounting to roughly 50bcm until the end of 2023, is about to expand intake capacity but also to sink costs. The 2030 renewable energy targets were significantly upgraded compared to the Fit for 55 program, and some countries like Germany moved to prioritize wind and solar capacity development over environmental concerns The crisis also revealed existing shortcomings in terms of EU cross-border energy infrastructure (e.g. in Central Eastern Europe but also on the Iberian Peninsula) as well as limits regarding energy policy, notably when it comes to energy solidarity. Key Issues Threats to Europe’s energy security remain, including from the crisis’ geopolitical effects Remarkable as the swift shift in European gas supply structures may have been, several major contingencies remain. Most importantly, LNG markets will remain tight until 2025 when US export capacity will see significant additions from the Golden Pass, Plaquemines and Corpus Christi projects presently under construction. By 2026, Qatar’s North Field East project will go online and increase the country’s annual capacity by around 50 percent. Moreover, India and China lead the way in enhancing their LNG regasification in Asia, adding to structural questions about securing gas supplies going forward. By the 2030s, Europe’s import needs are set to decrease, as a result of ambitious climate policies and additional efforts to decarbonize the energy system, the heating sector and industry. However, decarbonization pathways limit the possible time horizon to which European buyers can commit in supply contracts and puts them in a structural disadvantage. This means that Europe is facing competition from Asian growth markets which are ready to sign the long-term contracts it eschews based on its climate targets. A case in point is China’s 27-year contract with Qatar covering 108 million tons, which makes Germany’s much acclaimed 15-year deal over 2 million tons pale in comparison. Finally, the blow-up of the Nord Stream 1 and 2 pipeline systems exposed the vulnerability of physical offshore energy infrastructure to targeted attacks. Whilst not an immediate threat to Norwegian or Mediterranean pipelines, it further highlights Europe’s fragile supply structure during times of structurally tight markets and a geopolitically induced Russian supply cut. Europe will need to hedge against several geopolitical risks emerging from the political responses to the ongoing energy crisis. Two stand out: first, Europe’s LNG shopping spree ended up pricing less well-off countries out of the market. Notably Asian nations had difficulty securing LNG cargos at affordable prices in 2022 – in the case of Pakistan during times of droughts and floods. The resulting power outages were also a function of additional European coal demand replacing Russian gas. Similarly, high energy prices hit African nations hard, many of which were economically weakened in the wake of the Covid pandemic. There is also the risk of EU and G7 sanctions leading to a drop in Russian oil production, which would spike global prices despite an oil price cap on Russian crude. Again, this would over-proportionally impact on poorer countries, deteriorating their economic and political stability. Already, support for Ukraine and Western sanctions on Russia is much less pronounced outside the OECD club of mostly rich nations. Therefore, the extent to which the West manages to keep energy prices – and, consequently, also food prices – at bay will be a determining factor in the developing countries’ perception on who is to blame for the fallout of the present multi-crisis. Navigating the economic impact of high energy prices and state intervention in an emerging green race Energy prices will be higher for longer. Judged by future price dynamics, gas prices remain two or three times as high as pre-crisis long-term averages, with knock-on effects for the power market. This raises the specter of deindustrialization in Europe and is likely to put sustained pressure on public budgets to support businesses and households. Industrial and economic output remained remarkably stable across the EU in 2022. Yet, for Europe to retain a competitive industry going forward, much will depend on its ability to nurture a production model coping with higher prices, to incentivize industrial process innovation and – to this end – leverage both the presently established public funds and mobilize new financial instruments such as green bonds. This is not a given. Moreover, the transition may not happen at equal speed across Europe. Already today, most EU state aid is handed out by Germany and France. Both countries also make up more than half of the estimated €600 billion in fiscal support by European governments, with some €264 billion pledged by Berlin and €72 billion by Paris. This is susceptible to tilting the level playing field for industrial competition. Finally, the fine-grained division of labor within the EU is to be affected should the industrial core, that is Northern Italy, Southwestern Germany or the Benelux countries, offshore capacity. Equally, industrial decarbonization will alter sourcing needs, with knock-on effects for peripheral producers in Eastern and Southeastern Europe which – depending on their capacities – may fall of the supply chain. Russia’s war against Ukraine and the ensuing energy crisis have put in motion a fundamental rethink of EU energy policy, its goals and functioning. The incumbent liberal paradigm informing energy market design is severely questioned, both with a view to ensuring energy security and to successfully delivering on the EU’s decarbonization targets. The nationalization of key players in the gas and power market, including UNIPER, SEFE or EDF, as well as of energy grids (e.g., TENNET) epitomizes the more assertive role the state has acquired in 2022. Also, Western sanctions including the price cap on Russian oil mark a new era of market intervention. This extends to an emerging global ‘green race’ in strategically important sectors such as batteries and storage, clean tech or green hydrogen. The US Inflation Reduction Act (IRA), which attaches a ‘made in America’ clause to some $370 billion clean tech spending programs, caught Europe wrong-footed. Although the EU spends significant amounts of state aid, too, it mainly works through regulation by targets, rules, and directives, rather than through industrial policy. In a volte-face, Europe’s answer to the IRA, the Commission’s Net Zero Industry Act now envisions a 40 percent domestic production target for clean tech by 2030, to enhance competitiveness in green industries. Building on a strong momentum for more state intervention, the way forward is likely to be marked by a more strategic use of regulation towards key competitors, including the US but also China; a bigger state role in key industries, including through public ownership; and a shift from the EU’s emphasis on market competition to maintaining the ‘public interest’. This new market environment holds great potential for (clean) businesses at home but may also entail significant trade-offs when it comes to activities abroad, that is in competing economic blocs.

Executive Summary Increased living costs in France are at the center of the debate in the presidential run-off between the incumbent Emmanuel Macron and his far-right challenger Marine Le Pen on April 24. While Macron is betting on a major investment plan aimed at boosting France's productivity, Le Pen has chosen the national checkbook method , promising to “return money to the French”. France’s foreign policy is at a crossroads as French voters will decide between multilateralism and European integration, or a withdrawal from NATO’s command and a threat to western unity. Implications for International Business Discontent over welfare reforms and rising food and fuel prices will cause large-scale protests regardless of the election outcome, possibly disrupting operational flows and logistics. A Le Pen victory would additionally worsen France’s business climate due to a protectionist, anti-globalization agenda already rattling French bonds and banking stocks. State of Play Tough battle on spending power and political restructuring: nothing is decided yet The first round of the presidential election marked the end of the two traditional governing parties, the historic Gaullist party, Les Républicains (4.78%), and the Socialist Party (1.77%). Both alternated in power between 1958 and 2017, when centrist reformer Emmanuel Macron from En Marche became President. The incumbent will face off Marine Le Pen from the far-right Rassemblement national in a second round . Poll projections suggest a tight race. Despite a faster than expected post-Covid-19 economic recovery, purchasing power and the cost of living are the main campaign themes. In the face of Russia’s war against Ukraine exacerbating already high inflation, other themes such as the pandemic, climate change, immigration, and security were eclipsed. Moreover, the next president will face the challenge of securing a cohesive parliamentary majority in subsequent legislative elections. Even if Macron prevails in the presidential contest, En Marche is expected to lose seats in the National Assembly, making it necessary to broaden their alliance to govern effectively. In turn, a Le Pen victory would inevitably lead to a new French "cohabitation" as voters try to block a far-right parliamentary majority. The pension reform that Macron promised in 2017 but postponed due to the ‘Yellow Vests’ motorists protests and the pandemic, is expected to cause a political stir with massive social unrest in the coming months. Key Issues Protectionism vs. economic reforms: the election’s economic implications Emmanuel Macron sticks to a strategy of investment in the French manufacturing industry, as evidenced by his recent France 2030 plan, aimed at fostering innovation and industrial revival. The plan foresees spending 30 billion EUR on the ecological transition including reducing of carbon emissions as well as on the digitization and revitalization of industrial sectors like automotive, aerospace, biotechnology and healthcare. In parallel, Macron is committed to attracting foreign investors with his "Choose France" program. As announced in January 2022, this program’s fifth annual campaign is expected to inject more than 4 billion EUR into the French economy. Among the 21 new, mainly industrial projects are companies such as American chemicals firm Eastman, which is building a new plastics recycling plant in France. Unlike Macron, Marine Le Pen targets working-class core voters and defends above all measures of redistribution and social protection. In the absence of a real innovation policy, Le Pen sells a softened protectionism with focus on strengthening import controls, protecting the French economy from perceived unfair competition by ending posted work of employees carrying out a service in another EU member state on a temporary basis, prioritizing small and medium-sized companies in public tenders, and revising free trade agreements deemed not in France's interests. Le Pen also favors replacing the current property tax with a wealth tax directed at the rich, exempting primary residences. The two presidential candidates share a common desire to lower taxes without reducing public spending. Economists warn of the risk of deficits and debt slippage. Macroeconomic projections show that Le Pen's program, which blames the debt of previous governments, would increase it by five points of GDP, exceeding 3500 billion euros, 237 billion euros more than Macron's program. With the two programs, France's trade balance should also still be in deficit in 2027 (-2.6% and -2.8%). Macron vs. Le Pen: High stakes for Europe and the West As the second largest EU economy, with the only EU seat in the UN Security Council and as the EU’s sole nuclear power, France plays an important strategic role. The current presidential election therefore constitutes a defining moment for France’s foreign policy. While Le Pen’s priority is to withdraw from international institutions in an attempt to regain sovereignty and independence, Emmanuel Macron is convinced that France's interest lies in becoming more involved in global affairs through multilateral organizations. Macron strives for European sovereignty in response to supranational challenges, such as European defense, energy self-sufficiency, rising public debt, and future pandemics. After her defeat in 2017, Le Pen formally renounced her plans for a French departure from the Euro area (“Frexit”). A Le Pen victory now would still have a major impact on European governance. As a Eurosceptic, she plans to create an “Alliance of Free and Sovereign Nations” with Poland and Hungary to gradually replace what she sees as a “Federalist European Union”. This is a strong risk of political paralysis, both in Paris and in Brussels. Beyond the EU, Macron is also more committed to a strong transatlantic alliance. Despite characterizing NATO as “brain dead” in 2019 amidst the lack of coordination between then-US president Donald Trump and Europe as well as the unilateral behavior of Turkey, Macron strongly supported the alliance in the wake of Russia’s war on Ukraine. In turn, Le Pen opts for a French withdrawal from NATO's integrated command, claiming that the alliance’s Eastern expansion is the main reason for the war in Ukraine. Le Pen’s party has maintained strong ideological and financial ties with the Kremlin, receiving public support from Russian President Vladimir Putin in 2017 and several loans from Russian banks. Le Pen advocates for a strategic convergence between NATO and Russia within a new security architecture in Europe. Despite the US-French quarrel over a multibillion deal to supply Australia with submarines, US President Joe Biden and Macron are now on solid terms. At a time when Washington is trying to strengthen a Western coalition by relying in particular on Paris, the rise of a nationalist-populist candidate who is very critical of NATO and close to Russia is not reassuring across the Atlantic.

Executive Summary India is primarily concerned with domestic economic growth rather than with foreign policy considerations. Its over-arching mind-set remains largely protectionist. To stimulate growth in a post-pandemic economy, India initiated trade talks with the EU among others. The EU aims to tackle challenges relating to trade, technology and security with India. So far, while India shares Western concerns about China, it has rebuffed Western entreaties to get her on its side vis-à-vis Russia, and Delhi continues to strategically balance competing friendships. Implications for International Business Current trade talks with the EU will signal the extent to which India is willing to open up. While constituting a vast potential marketplace, India still has a difficult business environment. Successful EU-India negotiations will increase both the level of FDI and GDP growth, but their outcome will mainly depend on Delhi’s willingness to advance market-based mechanisms. State of Play India’s international relevance is growing despite focus on the domestic economy The world’s second most populous country, India has significant economic potential and is an ever more relevant global actor. Western markets are key exports destinations, and through vehicles such as the Quadrilateral Security Dialogue, India increasingly cooperates with the West. However, historic legacies of non-alignment and India’s ties to Russia for arms supplies, place limits on such cooperation. India also shares interests with China due to their reliance on coal power and similar stances in climate change talks. Finally, while India seeks to exploit strategic synergies with other countries where possible, its priority remains domestic economic growth. Attempts to engage with India, such as Germany’s invitation to Prime Minister Narendra Modi to the G7 Summit, are welcome, but proper strategic alignment is still a long way off. Domestically, India faces significant challenges. Proposed agricultural reforms were abandoned after triggering protests by farmers. The Covid-19 lockdown highlighted the vulnerabilities of the country’s unskilled migrant workers. A recent heatwave harmed planted crops, putting food security at risk even though India has copious wheat stocks at present. Meanwhile, the ruling party’s attempt to prioritize the majority Hindu community risks a backlash from minority communities, most notably Muslims. Key Issues A new chapter to tackle EU-India trade and technology challenges While India has gradually liberalized since the 1990s, trade is still hampered by poor infrastructure, corruption, technical restrictions, and high tariffs. A recent shift towards self-reliance has led the country to adopt protective measures, including preferential treatment of local suppliers for public procurement. After the economy contracted by 7.3 percent in FY2021 due to the pandemic, the government initiated trade talks with several countries to stimulate growth. In April 2022, Australia and India signed an agreement, and in May 2022, a deal between India and the UAE came into force, both making the vast majority of goods traded bilaterally duty-free. Also in April 2022, the EU and India launched the Trade and Technology Council as a coordination mechanism to tackle challenges relating to trade, technology and security, and to overcome difficulties that hampered earlier trade talks. The two sides also plan to resume trade talks with a view to conclude them by early 2024, ramping up their relationship not least because of shared concerns about China. There are, however, numerous differences to be resolved. Indian tariffs on cars, wines and spirits remain high. Also, registration requirements for various IT and electronic products and for in-country testing for telecom network elements are concerns for the EU. While India will likely call for greater access for its professionals, the granting of visas is not an EU competency but lies with its member states. The EU has not yet recognized India as ‘data-secure’ according its own levels of data protection. One incentive for talks to include data is that India’s position is closer to the EU’s focus on consumer rights, rather than America’s preference for companies or China’s for state control. Still, the main ingredient to overcome those numerous potential impediments to the talks will be political will, or the readiness to compromise. Western efforts to get India off the fence vis-à-vis China and Russia Historically, India has seen its bilateral relationships through specific national interests rather than through overarching alliances based on shared values. Its foreign policy is characterized by an ability to maintain ties with a range of countries hostile to each other, such as Russia, Iran, and the US. Its traditions of “non-interference” in others’ affairs made India a non-threatening partner to many. During the Cold War, India began to rely on Russia for arms supplies which has created a path dependency which persists today. The West became interested in India because it feared that the India-Pakistan conflict could turn nuclear. It also recognized India’s strong economic potential and the country’s role as a bulwark against an increasingly assertive China. While India in part shares Western worries regarding Beijing, certainly in the maritime domain, its primary concern is China’s claim over Indian territory and the related border disputes. On other issues, including climate change, India aligns more with China than the West. While India’s ties with the West have intensified, they do not put the country into this camp, as demonstrated by Delhi’s recent abstentions on various UN votes relating to Russia’s invasion of Ukraine. In their engagement with India, the West appears to be playing a long game, hoping that as Indian involvement in global affairs grows, it will see that its interests are better served by siding with the West. Both sides of the Atlantic are engaging with India on issues such as security and trusted technology. Whether the Trade and Technology Council serves to increase the EU’s “offer” to India will be one marker of success. Already in 2021, India and the US agreed on a global strategic partnership, though no formal alliance. In sum, Western engagement with India falls far short of an over-arching strategic alignment. A further potential impediment includes India’s domestic policy, in particular its treatment of religious minorities – notably Muslims but also Christians. In addition, India is simultaneously pursuing free trade talks

Executive Summary President Erdogan’s unorthodox economic policies continue to devalue the Turkish lira, precipitating a two-decade high of inflation and a low in net international reserves. Ankara’s ongoing balancing act over Russia’s war in Ukraine, its heavy-handed attempt to extract concessions for unblocking NATO enlargement, and its efforts to improve relations with Middle Eastern and African countries signal a further shift away from the West. The authoritarian president squarely focuses on shoring up public support for the 2023 election. Implications for International Business The risk of sovereign default or the introduction of capital controls spook investors, even as the lira’s weakening depresses asset prices, thus providing investment opportunities. Russian financial inflows into Turkey and the potential for U.S. and EU sanctions create compliance risks and burdens for Western companies. Ankara’s economic outreach to the Middle East and Africa helps to make the country a regional hub for multinational companies active in those regions. State of Play Economic Headwinds Spell Trouble for Erdogan Ahead of Turkey’s June 2023 presidential and parliamentary elections, President Erdogan has kicked off a long campaign. As his plan to turn the economy around by lowering interest rates has so far backfired, he is set to fuel polarization at home and pursue adventurist policies abroad to regain disgruntled voters. Already, his unorthodox policy to keep Turkey’s benchmark lending rate at 14% has led to the lowest real interest rate globally, of minus 60%, due to sky-rocketing inflation halving the Turkish lira’s value over the past year. Ankara’s foreign and security policy moves exacerbate the country’s macro risk. Another attack on Washington’s Kurdish partners fighting the Islamic State in northern Syria could trigger the reintroduction of US sanctions first implemented following an earlier cross-border military operation in October 2019. Similarly, taking steps to annex Northern Cyprus or acting on threats against Greek islands in the Aegean would expose Ankara to further EU measures last extended in November 2021 for Ankara’s unauthorized gas drilling in the Eastern Mediterranean. Finally, Turkey’s ongoing balancing act between Russia and Ukraine and its 40-day opposition to Finland’s and Sweden’s respective NATO membership bids have further strained relations with the West. Key Issues Turkey’s Foreign Policy Estranges Its Western Allies In power for nearly two decades, Erdogan is keener than ever to act internationally without restraints from NATO allies and transatlantic values. Such a geostrategic reorientation serves two interlinked ideological purposes. While Erdogan continues to challenge the Western-led international order abroad, he hopes to hasten the religious-political transformation of Turkish society at home. The Turkish president sees the US withdrawal from Afghanistan and Russia’s invasion of Ukraine as developments underlining Turkey’s geostrategic importance. To him, they constitute opportunities to bolster his leadership credentials by taking unilateral action in the Aegean and Syria and extracting concessions from the West, such as the lifting of various arms sales restrictions, particularly for the transfer of F-16 fighters. Perceived opportunities abroad and an unprecedented fall in voter support for Erdogan’s Islamist-rooted Justice and Development Party at home exacerbate risks of an adventurist foreign and security policy to create a rally-round-the-flag effect. While nationalist policies may offer some remedy for the growing economic grievances of the Turkish electorate, they are sure to further alienate Western allies. The Turkish security establishment, which has a growing recognition of the threat posed by an expansionist Russia, would prefer a turn away from Moscow for a realignment with the West, but they do not have sufficient leverage to shape Erdogan’s course of action. The political elite is also increasingly frustrated by the country’s economic downturn, in part triggered by its drift away from the West. But, Erdogan appears more interested in using this crisis to cash in by attracting Russian capital, extracting deals from the West, and continuing his balancing act between the Kremlin and NATO. Turkey Eyes Economic Opportunities in the East and the South Erdogan’s recognition of Turkey’s growing isolation in the Eastern Mediterranean and the Middle East as well as his pressing need for trade with and investment from these regions have led to a significant policy change toward the East and South. Ankara felt threatened by its exclusion from the East Mediterranean Gas Forum in 2019 and by deepening diplomatic and security cooperation between Cyprus, Egypt, Greece, Israel, and the Gulf states. Therefore, Turkey has begun to mend ties with Egypt, Israel, Saudi Arabia, and the UAE over the past year, including visits at the highest levels and some initial attempts at diplomatic and security cooperation. On the economic front, Ankara’s normalization initiatives have not only led to these countries easing some of their recent trade restrictions against Turkey but also a $5 bn swap deal with the UAE and a Saudi-Turkish declaration of a “new era of cooperation”. The political price Erdogan had to pay for this rapprochement was to distance himself from Islamist movements in the region, such as the Muslim Brotherhood and Hamas. He also had to strengthen counter-terrorism cooperation with Israel, especially against Iran, and stop holding the Saudi leadership accountable for Jamal Khashoggi’s murder. In Erdogan’s view, this is a small cost if the diplomatic and economic dividends of normalization help him reverse the Turkish economy’s meltdown and win the elections next year. Once having pocketed a renewed five-year mandate, he could reorient his regional policies again. Meanwhile, Ankara is also actively looking for additional economic and political opportunities in Africa, aiming to open its room for maneuver beyond the confines of the Western world. Turkish companies have a growing footprint and logistical capacity in the continent, including a 14-year concession to rehabilitate and operate Somalia’s Mogadishu port. Turkey’s volume of trade with sub-Saharan Africa reached the $10 bn milestone in 2021. If the Turkish government stopped seeing the West as an adversary as it does now despite forming an alliance through NATO, Turkish companies’ knowhow, and Ankara’s political influence.

Executive Summary High food and energy prices add to socio-economic pressures in the Maghreb, as a lack of structural reforms limits the region’s potential to benefit from the Ukraine war in energy and manufacturing. After a year of democratic backsliding and a recent constitutional referendum, Tunisia is particularly ill-equipped to face price pressure. Morocco and Algeria look more stable but are also conflict prone. The war in Ukraine underscores the Maghreb’s strategic importance for the EU: from gas imports to business relocations to focusing resources on conflict management in the Western Sahara. Implications for International Business Algeria’s potential as alternative energy supplier for Europe, combined with the government’s new investment code, increases the country’s attractiveness for international investors. Morocco, and to a lesser extent Tunisia, position themselves as key players in renewables, but political and social instability look set to deter international investors. The Maghreb’s strategic position as a gateway to Europe and Sub-Saharan Africa offers consequential business opportunities amid the war in Ukraine, especially in manufacturing. State of Play Russia’s war on Ukraine hurts Maghreb States’ imports and budgets The Maghreb is strongly impacted by the Russian attack against Ukraine. Tunisia is most vulnerable. It depends on wheat imports and is exposed to global prices as a net energy importer. Tunisia’s precarious public finances and high unemployment rate further weaken its ability to absorb shocks, as the government finalizes an austerity program with the IMF. Along with an increase of presidential powers after the constitutional referendum on 25 July, based on low turnout, this makes growing popular discontent more likely. Morocco, traditionally less reliant on wheat imports, currently suffers from disruptions in domestic production due to a severe drought. In response to high inflation and widespread protests earlier this year, the government increased energy subsidies. Although Algeria is affected by rising food prices as it imports most goods, it benefits from the rise in global energy prices as a major supplier. To curb social unrest, the government has suspended tax increases and is considering not to pursue planned subsidy reforms. Continued turmoil in Libya poses an additional security risk to its Maghreb neighbors. Key Issues Great power competition in the Maghreb adds to the region’s strategic importance The Maghreb has historically had strong ties with the West, especially Europe, on issues of security, counter¬terrorism, migration, and trade. As a result of the war in Ukraine, the region’s strategic importance is growing, mainly in security and economic terms. While the EU works to reduce its energy dependency on Russia, Maghreb states are important allies to win and keep. With its energy resources, Algeria is a key strategic partner for the West, particularly for Spain and Italy, which import gas directly from there. Both Russia’s and China’s engagement in the Maghreb adds to the region’s strategic importance for Europe. Russia’s relations with the Maghreb focus on economic and security interests, with an emphasis on energy, agriculture, and tourism in Morocco and Tunisia. Algeria, in turn, is Russia’s third largest arms importer. Russian involvement is also driven by the ambition to become a major player across Africa, and the Maghreb states are a gateway to the Sub-Saharan region). China shares this ambition and has invested in digital and tech initiatives, as countries such as Tunisia and Morocco became home to major Digital Silk Road projects. Morocco has begun to strengthen ties with the West by joining the Abraham Accords and recognizing Israel as the fourth Arab country. Besides migration, Morocco is a key partner in renewable energy, which is crucial for Europe’s energy transition. Increasingly, however, the conflict between Morocco and Algeria over Western Sahara interferes with Europe’s short- and long-term needs. Rabat recently won US recognition of its sovereignty over this territory and Spanish support for its autonomy plan. Algeria, in turn, suspended a two-decade friendship treaty with Madrid, even threatening to stop its supply of gas. This, however, is unlikely for two reasons: First, Algiers wants to position itself as a reliable partner to Europe, and second, it relies heavily on exports earnings to ensure domestic political and social stability. The country’s diplomatic proximity to Russia renders the Western Sahara conflict a geopolitical issue to focus on for the West, especially as Russia has abandoned its neutral position and sent signals of support to the nationalist liberation movement. Algeria thus appears to be trying to leverage its energy supplies for political support. Structural problems limit the region’s potential for European manufacturing Morocco and Tunisia have directly benefited from the supply-chain distribution in the automotive industry, as some manufacturers moved their production there following the war in Ukraine. For instance, Japanese car parts suppliers Yazaki and Fujikura shifted part of their fabrication to Morocco and cable supplier Leoni Wiring Systems moved to Tunisia. Manufacturing relocations could take place in the aeronautic, textile or agribusiness industries, where the two countries have strong competitive advantages due to their geographic location, skilled and cost-effective labor force, and know-how. Both countries also have great renewable energy potential. They began to expand their capacity by investing in the necessary infrastructure, adopting a regulatory framework to promote investment and facilitate public- private partnerships through tailored financing mechanisms. However, EU countries have yet to officially promote investments in these states as part of the European Green Deal strategy. In addition, the three Maghreb governments have made efforts to encourage FDI by providing financial and land incentives, streamlining procedures, and creating opportunities for public-private partnerships. Nevertheless, the political and social instability in the region, the lack of investment in infrastructure (except for Morocco), and the lack of reforms in the banking and financial system are key challenges holding back multinational companies. In Tunisia in particular, social unrest is becoming a major obstacle to the country’s economic potential, especially as the Labor Union openly opposes plans to reform public enterprises, reduce subsidies and cut budgets. Strikes are expected in the coming months as the government prepares its budget plans for next year. The three countries look set to suffer from the Ukraine war’s negative effects more than they could benefit from increasing relocation of production. Companies looking to expand their presence in the Maghreb must weigh the region's potential against the threat of political instability, structural weaknesses and sluggish infrastructure investment.

Executive Summary Sub-Saharan Africa’s investment landscape is becoming more diverse as the digital economy, financial services, mobility, logistics, and health tech are attracting more local and foreign investments. The region is a growth market with a 4% increase in GDP in 2021 and expected 3.6% in 2022, an increase in the number of SMEs and an annual infrastructure gap of USD 100 billion. China surpassed the EU in 2020 as Sub-Saharan Africa’s largest trade partner, not least thanks to its Belt and Road initiative, which the G7 now aim to counter with a Partnership for Global Infrastructure and Investment. Implications for International Businesses The new free trade area will harmonize policies on investment, competition, and intellectual property rights, and reduce the risks of shifting regulations to attract more FDI and boost foreign trade. The political uncertainties around upcoming elections In Nigeria and the Democratic Republic of the Congo (DRC), two resource-rich regional powers, have an impact on regional security and economic policy. The region’s startup ecosystem is expanding into sectors like climate control, edutech, healthtech, and agritech, in addition to existing unicorns such as digital payment infrastructure companies Flutterwave and Interswitch and global talent network Andela. State of Play World powers courting a continent on the rise Sub-Saharan Africa has traditionally been a market for American and European goods and a fertile ground for the promotion of US strategic interests. However, US and EU investments in Africa are often tied to strict fiscal and political conditions. China, in turn, takes a more pragmatic, trade-driven approach to engaging with the region. With its Belt and Road Initiative, it has aggressively expanded its economic interests over the last decade. It sees the region as a source of key raw materials, such as cobalt, platinum and oil, as well as agricultural products. A large population offers relatively cheap labor and a growth market for Chinese goods. China has expanded access to the Chinese market for African exporters and has now replaced the EU as Sub-Saharan Africa’s largest trade partner. Besides being a sought-after trading partner of the world powers, Africa has begun to develop its own form of economic integration. The African Continental Free Trade Area (AfCFTA) has begun its pilot phase in September 2022 comprising seven states: Rwanda, Cameroon, Egypt, Ghana, Kenya, Mauritius, and Tanzania. As the agreement gets implemented over the coming years, participating countries will gain access to regional markets at preferential tariff rates, and identify comparable policies in customs, logistics, and legislation to ultimately facilitate continent-wide integration. At the same time, insecurity has been on the rise in the region over the past five years, with a direct impact on irregular migration, transnational crime, and global terrorist activity. The Western Sahel region has become a hotbed for terrorist activity linked to the Islamic State; similarly, there has been a marked uptick in such activity in eastern Africa. Potential threats to progress include conflicts like the civil war in Ethiopia and military coups like recently in Mali, Burkina Faso, Chad, Sudan, and Guinea. South Africa’s economy has been negatively affected by social unrest as a result of the prosecution of former President Jacob Zuma, poverty and unemployment. Generally, graft, inflation, and weak institutions are the main sources of risk in the region. Key Issues The region’s growing geostrategic importance drives the quest for closer partnerships With substantial oil and gas reserves, Nigeria, South Africa, and Angola are among the most important resource-rich countries in Sub-Saharan Africa. Other countries such as the DRC produce strategic minerals like lithium and cobalt, which are in high demand by both Western and Chinese manufacturers. Still, the region consistently ranks low in global development indices and includes some of the world’s poorest countries, characterized by corruption, political instability and a lack of infrastructure. China is present in almost all countries but seems to focus on the resource-rich ones with weak democratic structures, such as Angola, Zambia, and the DRC. It also makes inroads in such larger countries as Nigeria and Kenya, investing in flagship projects like upgrading the Standard Gauge Railway between Kenya’s capital Nairobi and the port city of Mombasa. China’s growing presence opposes Western interests in the region. The US has raised questions about Chinese debt diplomacy and loan sustainability, starting a Prosper Africa initiative in response to Beijing’s growing strategic advantage. Yet, Sub- Saharan countries ignore US concerns and continue to pursue deals with China because of its track record of engagement, regional economic pressures, and a lack of alternative financing on similar terms. The disproportionally high number of abstentions and non-votes on the UN resolution condemning Russia’s invasion of Ukraine shows that many African countries are unwilling to lean too heavily to one – or, indeed, to the Western – side. China’s BRI investments are projected to increase, and Russia and India also have stakes in the region. This makes it even less likely that the G7 investment initiatives will reverse the trend of waning Western influence. Competition between China and the West will provide more financing opportunities for firms, but could weaken fiscal discipline, increase corruption, and worsen the debt profile of a number of countries. Sub-Saharan “rising stars” offer plenty of economic opportunities South Africa and Nigeria have long been the leading economies in the region, accounting for about 40% of Sub-Saharan Africa’s GDP. However, both countries have also been plagued by high levels of corruption, which has limited their ability to maximize revenues from mineral resources and use them to meet the urgent needs of the population. Despite recent inflationary pressures, countries such as Ghana and Rwanda are among the rising economic stars, having consistently demonstrated a degree of fiscal discipline and growth. Ghana’s top exports are oil, gold, and cocoa, while Rwanda’s economy has benefited from investments in tourism, agriculture, and mining. In addition, Kenya and Côte d’Ivoire are buoyant with diversified economies driven by agricultural exports and investments in construction, infrastructure, and other sectors. Kenya is East Africa’s economic hub and Cote d’Ivoire’s economy grew by an average of 8% annually between 2012 and 2019. In Côte d’Ivoire, the government is currently implementing economic reforms to restructure the banking sector and broaden the tax base. The substantial infrastructure gap in Sub-Saharan Africa offers great investment opportunities for international firms. As AfCFTA begins to be implemented, investing in a single African country can potentially provide access to a continental market of 1.3 billion people. By linking the low tariffs, ease of doing business, tax incentives, and regional integration offered by AfCFTA with the new infrastructure initiatives of the US, EU and G7, Western companies can tap into medium-risk opportunities in various sectors. The digital and knowledge economies are also promising, as the region is home to a young population that increasingly uses the internet to shop, trade, and acquire skills relevant to a global market. Potential risks for Western companies seeking to invest in Sub-Saharan Africa include political instability (as recent coups possibly indicate a trend), corruption (especially in the oil sector in Nigeria and Angola), inconsistent government policies, and in some cases difficulties in repatriating profits due to financial regulations, e.g., for foreign airlines in Nigeria due to stricter forex controls.