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China Passes U.S. As No. 1 Destination For Foreign Investment As Coronavirus Upends Global Economy – Forbes

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4 years ago

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Topline

As the world struggled to contain the coronavirus crisis, foreign direct investment in the United States plummeted 49% in 2020 while investment in China rose 4%, making China the largest recipient of foreign inflows for the first time, according to a report released Sunday by the United Nations Conference on Trade and Development. 

Key Facts

China pulled in $163 billion in new investments from foreign businesses in 2020 while the U.S. fell into second place with $134 billion. 

The U.S. and China had broadly different responses to the pandemic, with China’s government instituting strict, large-scale lockdown measures in early 2020 while the United States’ response was far less centralized and far less effective in curbing the spread of the virus. 

That prompted a major shift in the global economy—while the United States and other Western countries struggled to contain the pandemic, China went back to work, manufacturing picked up, and as a result China was the only major economy to report economic expansion in 2020. 

While the momentum of FDI has been shifting towards China for several years, the total stock of foreign investment is still larger in the United States, the Wall Street Journal notes.

FDI in India rose 13% in 2020, while FDI in the European Union fell by two-thirds.

The U.N. expects foreign investment overall to remain weak in 2021. 

Big Number

42%. That’s how much foreign direct investment fell across the globe in 2020, from $1.5 trillion in 2019 to $859 billion in 2020. Most of that decline occurred in developed countries, the U.N. said. 

Key Background

Despite increasingly frosty relations between the U.S. and China, western firms are continuing to pour their resources into the rapidly growing economy there. Last month, Goldman Sachs took full ownership of its Chinese joint venture partner. JPMorgan did the same in November. Tesla is ramping up production in China and early last year, PepsiCo spent $705 million to buy a Chinese snack brand.

Crucial Quote 

“U.S. and other foreign firms will continue to invest in China as it remains one of the most resilient economies during the global pandemic and as future growth potential there remains stronger than most other major economies,” Rhodium Group analyst Adam Lysenko told Bloomberg last month. 

Further Reading

China Overtakes U.S. as World’s Leading Destination for Foreign Direct Investment (Wall Street Journal)

Biden Will Be More Predictable Than Trump On Trade, But Don’t Expect Tariff Rollbacks Any Time Soon (Forbes)

China’s Growth Beats Estimates as Economy Powers Out of Covid (Bloomberg)

China’s Exports Surged 9.5% In August Despite Escalating Tensions With The United States (Forbes)

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This report by The Canadian Press was first published Oct. 16, 2024.

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The Canadian Press. All rights reserved.

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The Canadian Press. All rights reserved.

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