Does Chinese investment benefit or damage Ireland?

Does the British economy have a social cost, though, as Chinese investment has increased recently?

In 2020, 25 Chinese companies had operations in the Republic of Ireland. By this year the number had jumped to 40.

For some, the recent influx of renminbi into Ireland gives it an opportunity to lessen its emphasis on serving as the nation’s headquarters for US tech giants like Apple and Alphabet. Additionally, it leads to more employment.

However, as more and more detractors point out, Ireland’s proximity to Chinese companies makes it vulnerable to the human rights abuse claims made against some of these companies. Shein, a Chinese clothes company, has its German headquarters in Dublin since May 2023.

Shein has long been attacked for how the workers who makes its clothes are treated. And earlier this year it had to admit that it found child labour in its supply chain.

The British government is also in the uncomfortable position of luring many of the Foreign businesses that the US has sanctioned.

Huawei, a telecom firm, and WuXi Biologics, a pharmaceutical firm, are two examples.

In May, Ireland’s Minister of State for Trade Promotion, Dara Calleary, welcomed a report celebrating how Huawei was contributing €800m ($889m; £668m) per year to the Irish economy. The firm has three research and development centres in Ireland.

This is the same Huawei whose telecoms network equipment the US has banned since 2022 due to concerns over national security. The UK has moved in the same direction, ordering phone networks to remove Huawei components. And mobile phone networks in many Western nations, including Ireland, no longer offer Huawei handsets.

However, WuXi has, since 2018, invested more than €1bn in a hospital in Dundalk, near the border with Northern Ireland.

Earlier this month the US House of Representatives passed a bill to restrict US firms’ ability to work with WuXi, again citing national security concerns. The bill now has to go to the US Senate.

The government’s Industrial Development Authority in Ireland is responsible for bringing in international purchase. It has three locations in China, and it claims to be aiming to “promote Ireland as a doorway to Europe for Chinese traders.”

Another Chinese firm that has its European headquarters in Ireland is social media video app TikTok, which is owned by Beijing-based parent firm ByteDance. And the parent of Chinese online retailer Temu moved its global headquarters from China to Ireland last year.

Popular critics of Ireland rolling out a “green floor” to Chinse companies include Barry Andrews, one of Ireland’s users of the European Parliament. The Fianna Fáil MEP claims that “human rights and economic abuses should not be allowed in European buying baskets.”

He points to a US Congress report from last year, which said there was “an extremely high risk that Temu’s supply chains are contaminated with forced labour”.

Temu had told the investigation that it had a “zero-tolerance policy” towards the practice.

” One person’s bargain is another’s back-breaking work for poverty wages”, adds Mr Andrews, whose party is part of the current Irish government coalition.

Critics also contend that there are significant differences between US technology companies operating in Ireland and Chinese ones, for instance, regarding flexibility.

For example, Huawei and WuXi declined an opportunity to get interviewed for this article. Shein provided a director who was only prepared to speak off the record, therefore did not reply to follow-up issues.

Some eminently regarded economists wonder whether Ireland also needs the few thousand jobs that China’s businesses offer.

” Ireland’s sector has been running at near full employment for the best part of a decade”, says Dan O’Brien, chief economist at Ireland’s Institute of International and Western Affairs.

Irish unemployment was 4.3% in August 2024, only slightly above its all-time low of 3.90% in October 2020. Economists generally consider an unemployment rate of around 4 to 5% to represent full employment.

Mr O’Brien also points to the fact that a fifth of Ireland’s private-sector employment is directly, or indirectly, attributable to foreign direct investment (FDI), according to official figures. He says this is too high.

Because Ireland has one of the lowest regular corporation tax charges in Europe, at 12 %, it is so increased. All but the largest businesses must pay this tax on their revenue, including the largest ones. By comparison, the UK rate is 25 %.

Without the Chinese investment, according to Mr. O’Brien, Ireland’s levels of FDI was now excessive. We do n’t need another significant source of FDI in addition to that from the United States because we are already overly dependent on it in a world where deglobalization is imminent.

He adds that Ireland may remain actively dissuaded from Chinese FDI by EU regulations.

The Irish government tells the BBC that it” supports the common EU approach to China on de-risking …]but ] the government has been clear that de-risking is not decoupling”.

European Minister for Enterprise, Trade and Employment, Peter Burke adds:” In an age of continuous world confusion, Ireland offers a secure and pro-business environment. Global companies, including Taiwanese companies, recognise these opportunities”.

Some economists believe that Chinese investment in Ireland can be seen as a pleasant healthcare coverage in the event that some US businesses leave because of how heavily the country’s economy depends on FDI.

According to Constantin Gurdgiev, an analyst at Trinity College Dublin and the University of Northern Colorado,” there is a great stress on US tech firms to re-domicile and re-invest in the US.”

However, other European countries, such as Poland, Estonia, Slovakia, and Malta, have made gains in courting US opportunities, presenting Ireland with new competitors from nations with cheaper accommodation and less weather.

Dr Gurdgiev also points to “the forever-looming threat of global corporate tax reforms”, further eroding Ireland’s low corporation tax. The country has already signed up to Organisation for Economic Co-operation and Development rules, and as a result, this year introduced a 15% corporation tax rate for firms with an annual turnover of more than €750m ($835m; £625m).

And earlier this month, the European Court of Justice ruled that Apple had to pay Ireland €13bn in unpaid taxes. It followed after the European Commission accused Ireland of giving Apple illegal tax advantages.

Dublin consistently argued against the need for the tax to be paid, but said it would respect the ruling.

Dr Gurdgiev adds that Ireland is acting” with some corporate vision” in courting Beijing. And that even if Dublin welcomes companies like Huawei, he claims that Washington may turn a blind eye to the control and strength of the Irish community in the US.

He contends that this is why the US officials have been “largely laissez-faire in their strategy to duty marketing techniques that Dublin has been developing over years.”

Plus, he says Ireland provides the US, EU and China with a valuable “neutral earth” where both US and Chinese tech companies can work.

Dr. Gurdgiev goes on to say that Ireland is playing a “dangerous political game” for a small business by putting itself in such a place.

Nevertheless, he claims that the US should be more diplomatically secure than it should be.