China overtakes US as leading Foreign Direct Investment Destination

China overtakes US as leading Foreign Direct Investment Destination

China has overtaken the US as the world’s top destination for new foreign direct investment. This is according to UN figures that have been recently released, which marks a major milestone in Global finance and a shift in power away from the US.

Last year, investments into America from overseas companies fell by almost half. This has led to the loss of its number one status. In contrast, UN figures reveal direct investment into Chinese firms climbed up by 4%, ranking it at number one globally. The top ranking demonstrates China’s growing influence on the world economic stage.

In a recent report, the United Nations Conference on Trade and Development (UNCTAD) said that China had $163bn (£119bn) in inflows last year. This compares to $134bn attracted by the US. The US received $251bn in new foreign direct investment in 2019. China received $140bn. This shows that China may be number one for new foreign investment, but the US still dominates when it comes to total foreign investments.

This news reflects China spending decades as the most attractive location for foreign businesses looking to expand overseas. However, experts state that the figures underline China’s move toward the center of the global economy. Of course, this has long been dominated by the US. As we know, China is currently involved in a trade war with the US. Furthermore, it is predicted to jump to the number one position by 2028.

 The Consequences and Effects of the Trump Slump

In 2016, Foreign investment in the US reached its peak at $472bn. At this time, foreign investment in China was $134 billion. Skip a few years forward and China has continued to rise. The US, on the other hand, continues to drop each year.

Remember that the Trump administration encouraged American companies to leave China. It was keen to re-establish operations in the US. It also warned Chinese companies and investors that they would face new scrutiny when investing in America.

The US economy continues to struggle as a result of the recent Covid-19 outbreak. China’s economy, however, has and continues to pick up speed. Measuring in gross domestic product (GDP), China’s economy grew 2.3% in 2020. Remarkably, this makes it the only major economy in the world to avoid a contraction in 2020. Many economists are surprised with the speed of its recovery, especially as it has negative relations with the US.

china overrules US

What the Overall Picture Looks Like

Overall, global foreign direct investment (FDI) dropped by a dramatic 42% in 2020.

The UK fell more than 100% in new foreign direct investment last year from $45 billion in 2019 down to -$1.3 billion.

As the US moves into a new presidency, we are all expecting time of great change.

Don’t forget to keep checking our news and publications. We are committed to providing you with the most important stories from across the world and we will be back soon to update you with the latest financial news from the UK and America.

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