Follow the money: How FDI is redrawing the global economy

This episode of The McKinsey Podcast explores how foreign direct investment (FDI) is becoming a critical strategic signal for the future of global trade and economic competitiveness. Host Roberta Fissaro is joined by McKinsey partners Nick Leung and Olivia White to discuss a new MGI report revealing that FDI is no longer just a financial metric but a powerful indicator of where the world’s future industries—AI, semiconductors, batteries, green energy, and data centers—will be built. The research shows a dramatic shift: three-quarters of recent FDI is flowing into 'future-shaping' industries, with massive investments reshaping global supply chains and geopolitical dynamics. The U.S. is emerging as a major beneficiary due to strong policy incentives, high expected returns, and a growing ecosystem for advanced manufacturing, while China, facing economic headwinds, is pivoting from inbound to outbound investment. The episode emphasizes that FDI commitments today are not just about cost efficiency but about securing long-term strategic advantage, with CEOs needing to act decisively to avoid being left behind. Key success factors for FDI-driven growth include strong human capital ecosystems, domestic investment, and integration into global supply chains. The discussion underscores that the world is moving away from the 'flat world' paradigm of lowest-cost manufacturing toward a geo-economic reality where location, technology, and strategic timing are paramount. The report highlights that investments in these future industries are on an unprecedented scale—capacity in batteries and data centers could more than quadruple and double respectively outside China and the U.S. in just a few years. The episode concludes with actionable insights: CEOs must recognize that today’s FDI decisions will define tomorrow’s competitive landscape, act at scale in high-impact sectors, and adapt their assumptions about risk, return, and location. Energy resources and supply chain integration remain foundational, even as technology drives new possibilities. The overall tone is one of urgency and strategic foresight.