UN: China overtakes US for Foreign Direct Investment

Recent figures by the United Nations Conference on Trade and Development highlights that, China has surpassed the United States as the world’s top destination for the foreign direct investment (FDI) in the year 2020.

Highlights

  • The eastward shift of the destination was the result of Covid-19 pandemic from which the United States is still recovering.
  • The New investments by overseas businesses into the US fell by 49 percent in the year 2020.
  • China has attracted the new investments in 2020 while, US maintained the higher position with respect to the total stock of foreign investment.
  • The higher stock shows that the US has been most attractive location for foreign businesses since decades.

FDI scenario in US

The Foreign investment in the U.S. started picking up in the year 2016. Till 2016, the investments stood at $472 billion in contrast to total foreign investment of $134 billion in China. However, since 2017 the investments in China continued to rise while in U.S. continued to fall.

Foreign Direct Investment (FDI)

The investment in the form of controlling ownership of a business in one country by an entity which is based in another country is called as the foreign direct investment. Thus, it is distinguished from a foreign portfolio investment with respect to the direct control. The origin of the investment does not impact the definition of the FDI.

Foreign portfolio investment

It is a grouping of assets like stocks, bonds and cash equivalents. Such investments are held directly by an investor or it is managed by the financial professionals. In the economics, such investments mean entry of funds into a country where foreigners deposit their money in a country’s bank or when they make purchases in the country’s stock and bond markets.

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