China overtakes US as top country for foreign investment | DW News
Foreign companies are losing interest in the United States, taking advantage of China’s booming economy and the high level of control over the Covid-19 pandemic in the Middle Kingdom.
Foreign direct investment in the U.S. fell 49% to $ 134 billion last year, according to the a report released by the UN last Sunday. Foreign investments in China, by contrast, grew by 4%, reaching 163 billion in 2020.
Last year was the first in history when the Celestial Empire overtook the United States in this indicator.. China is currently the world’s largest recipient of foreign investment.
While Covid-19 was a major factor in the drop in investment in the US (and most countries in the world), this trend was born long before the pandemic.
After peaking at $ 440 billion in 2015, foreign investment has fallen sharply, according to the U.S. Department of Commerce.. Former President’s Trade Policy Donald Trump damaged assets from overseas, especially China, which saw the sharpest investment outflow in the past few years. Growing economic uncertainty around the world has also contributed to this decline..
Last year, the decline in FDI in the United States was most pronounced in wholesale trade, financial services and manufacturing.. International mergers and acquisitions, and sales of US assets to foreign investors fell 41%.
Meanwhile, China’s explosive economic growth, as well as its rapid recovery from the pandemic, helped foreign investment soar.. China’s GDP grew 2.3% last year as most of the world’s largest economies contracted. The country pursued a tough isolation policy and allocated hundreds of billions of dollars to major infrastructure projects that foster economic growth.
China’s ability to control the spread of the virus «helped stabilize investments after early blocking», noted in the report.
Foreign direct investment in India has also skyrocketed, from less than $ 25 billion in 2014 to $ 57 billion last year. Much of this growth has been caused by politics, which enabled global brands such as Ikea and Uniqlo to open stores in the country, as well as a national campaign «Make in India» to expand the production base.
It helped India’s overseas investment soar 13% last year.
Most economies are less fortunate. Similar figures for the UK and Italy fell by almost 100%. Direct foreign investments in Russia decreased by 96%, Germany – by 61%, Brazil – by 50%. Australia, France, Canada and Indonesia, among the top recipients of foreign direct investment in 2019, also dipped by double digits.
Overall, foreign direct investment fell 42% last year, to its lowest level since the 1990s, and 30% below the minimum reached during the 2008-2009 global financial crisis..
The attractiveness of the United States as a safe and secure place for investment by foreign companies has been one of the most powerful drivers of the country’s economic growth over the past several decades.. The UN said that the circumstances that impede the flow of investment to the United States and other countries will continue this year..
«The negative consequences of the pandemic in the investment segment are not going anywhere yet. Investors are likely to remain wary when channeling capital to new production assets overseas», – said the director of the investment department of UNCTAD James Zhang.