China surpassed the United States as the world’s top recipient of news foreign direct investment with inflows of US$163 billion in 2020, U.N. Conference on Trade and Development figures released on Sunday show.
The figures from UNCTAD highlight the effect of the nearly year-long coronavirus pandemic on the two countries, particularly the contrast in how they’ve dealt with it, and the trade war with China waged by the former Trump administration.
Despite the pandemic, which has disproportionately infected 25 million Americans among the almost 100 million people COVID-19 cases worldwide, China reinvigorated its economy in the fourth quarter. China’s authoritarian capitalist policies led to 2.3 percent GDP growth last year, unlike every other major economy’s declining figures.
New investment in China from overseas companies rose by 4 percent in 2020 over the previous year. By comparison, the United States — the former Number 1 for new global foreign direct investment, or FDI — had new inflows of US$134 billion in 2020, steeply down by 49 percent from 2019 due to setbacks in wholesale trade, financial services and manufacturing.
China received US$140 billion of new inflows from overseas companies — compared with the United States’ US$251 billion — in 2019, powered by investment in high-tech and cross-border mergers and acquisitions, mainly in information and communications technology and pharmaceuticals.
But the United States still leads for total foreign investment due to many years of attracting business expansion from abroad.
Global foreign direct investment sunk 42{1edf31a8ab277315d62dca480d04f65185159e2c6ae57ab262bb568340a9dfb4} in 2020 to $859bn – the lowest level since the 1990s, according to new @UNCTAD estimates.
Uncertainty about #COVID19's evolution will continue to hamper #FDI in 2021, threatening sustainable recovery prospects. https://t.co/xbGMvpZBJb pic.twitter.com/mYmY49bIQ3
— UNCTAD (@UNCTAD) January 24, 2021
Lingering pandemic shocks
More broadly, global FDI “collapsed” in 2020, falling to the lowest level it has been since the 1990s, and about one-third below the level of the investment collapse brought on by the 2008-2009 global financial crisis, UNCTAD said in its latest Investment Trends Monitor.
Global FDI fell by 42 percent, down US$859 billion, from US$1.5 trillion in 2019, UNCTAD reported. It predicted FDI flows will remain weak in 2021 despite projections for a global economic recovery.
“The effects of the pandemic on investment will linger,” said James Zhan, director of UNCTAD’s investment division. “Investors are likely to remain cautious in committing capital to new overseas productive assets.”
FDI flows to Europe also “dried up” in 2020, said UNCTAD, falling by two-thirds to $4 billion — and, particularly, in the Brexit-challenged United Kingdom, where it fell to zero. By contrast, Sweden and Spain notched sharp increases in FDI.
Among developing nations, FDI flows decreased by 37 percent in Central and South America and the Caribbean, and fell by 18 percent in Africa and by 4 percent in parts of Asia. The 10 members of the Association of Southeast Asian Nations, or ASEAN — Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam — saw a collective 31 percent decline in FDI flows.