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China overtakes U.S. as leading destination for foreign direct investment

Christian Fernsby |
China overtook the U.S. as the world's top destination for new foreign direct investment last year.

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Topics: CHINA    U.S.   

New investments by overseas businesses into the U.S., which for decades held the No. 1 spot, fell 49% in 2020, according to U.N. figures released Sunday, as the country struggled to curb the spread of the new coronavirus and economic output slumped.

China, long ranked No. 2, saw direct investments by foreign companies climb 4%, the United Nations Conference on Trade and Development said. Beijing used strict lockdowns to largely contain Covid-19 after the disease first emerged in a central Chinese city, and China's gross domestic product grew even as most other major economies contracted last year.

In China, the flow of investments by multinational companies continued despite the upheavals of the pandemic, with companies from U.S. industrial giant Honeywell International Inc. and German sportswear maker Adidas AG expanding their operations there.

Unctad doesn't expect to see a significant revival of foreign direct investment this year, globally or in countries that saw falls in 2020.

"Investors are likely to remain cautious in committing capital," said James Zhan, Unctad's director of investment and enterprise. He doesn't expect a real rebound to come until 2022. Even then, he said, "the road to full FDI recovery will be bumpy."

The Unctad numbers show a stark divide between East and West in the global economy. In 2020, East Asia attracted a third of all foreign investment globally, its largest share since records began in the 1980s. India saw a 13% increase, driven largely by rising demand for digital services.

In the West, the European Union suffered a 71% drop. The U.K. and Italy, which have suffered high mortality rates and deep economic contractions, attracted no new investment. Germany, which has fared better on both counts, saw a 61% drop.

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