China overtook US in foreign direct investment, UN agency says

[NEW YORK] China overtook the US as the largest recipient of foreign direct investment in 2020, a year in which overall global flows cratered by 42 per cent as a result of the coronavirus pandemic, a United Nations trade agency said.

Flows fell to an estimated US$859 billion from US$1.5 trillion in 2019, according to the UNCTAD Investment Trends Monitor. It was the lowest level since the 1990s and 30 per cent below the investment trough that followed the 2008-09 global financial crisis.

While the world as a whole struggled, China held on, said UNCTAD, the United Nations Conference on Trade and Development. It became the world's largest FDI recipient with flows rising by 4 per cent to US$163 billion.

A return to positive GDP growth and a targeted investment facilitation programme helped stabilise investment in China after the first coronavirus lockdowns there, the agency said.

Among Chinese sectors, high-tech industries saw an FDI increase of 11 per cent in 2020, and cross-border mergers and acquisitions rose by 54 per cent, mostly in information and communications technology, and pharmaceutical industries.

Flows to North America slid by 46 per cent to US$166 billion, and those to the US alone fell 49 per cent to an estimated US$134 billion in 2020.

Europe fared worse, with flows down by two-thirds to a negative US$4 billion. In the UK, FDI fell to zero, and declines were recorded in other major countries. Elsewhere, flows to Australia slumped but those to Israel rose.

Globally, the UN agency expects foreign direct investment to remain weak in 2021 due to uncertainty over the evolution of the Covid-19 pandemic.

"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."

BLOOMBERG