The new crown epidemic has accelerated the shift of the global economic center to the east. Last year, China received more foreign direct investment (FDI) than other countries in the world, pushing the United States off the throne of the largest inflow of FDI.
According to a report released on Sunday by the United Nations Conference on Trade and Development (UNCTAD), foreign investment in the United States dropped by 49% last year to 134 billion US dollars, while the United States was struggling to control the spread of the epidemic and the economic output fell sharply. In China, which ranks second, FDI increased slightly by 4% to US$163 billion last year. Beijing adopted strict blockade measures to roughly control the spread of the epidemic after the first outbreak in the central city of Wuhan. This made 2020 the first year that FDI flows into China surpassed the United States.
Although the epidemic was a major factor in the sharp drop in FDI in the United States and most parts of the world, the reduction of foreign investment in the United States has already begun before the epidemic.
FDI in the United States reached a peak of US$472 billion in 2016, when China’s FDI was US$134 billion. Since then, foreign investment in China has continued to increase, but investment in the United States has declined year after year.
According to the report, the decline in US FDI last year was most pronounced in the areas of wholesale trade, financial services and manufacturing. International mergers and acquisitions and the sale of US assets to foreign investors also fell by 41%. At the same time, China’s explosive economic growth and rapid recovery from the epidemic have helped foreign investment soar. China’s economy grew by 2.3% last year, while most of the world’s major economies shrank. The report said that China could control the spread of the virus and “help stabilize investment”.
India’s FDI has also surged, from less than US$25 billion in 2014 when Prime Minister Modi took office to US$57 billion last year, mainly due to policy changes that allowed global brands such as Ikea and Uniqlo to open branches in India. Moreover, Modi also advocated “Made in India” to expand the manufacturing base. India’s FDI surged 13% last year.
However, most economies were not so lucky. The FDI of the British and Italy plummeted by nearly 100%, the FDI of Russia fell 96%, Germany fell 61% and Brazil fell 50%. Australia, France, Canada and Indonesia, among the top countries in terms of FDI in 2019, all fell by more than 10%.
On the whole, global FDI fell by 42% last year to US$859 billion, the lowest level since the 1990s and 30% less than the deep trough after the 2009 financial crisis.