UN Report: China Becomes the World’s Largest Recipient of FDI
Release time:2017-02-05
On January 29 local time, United Nations Conference on Trade and Development (UNCTAD) released the Global Investment Trends Monitor, saying global foreign direct investment (FDI) inflows declined by 8% to an estimated US$1.26 trillion in 2014, the lowest level since 2009. In 2014, China, with a modest increase of 3%, or US$128 billion, became the world’s largest recipient of FDI.
This is the first time for China to overtake the United States in terms of FDI since 2003, which used to be the World’s largest recipient of FDI.
Sun Jiwen, spokesperson of the Ministry of Commerce, commented on this on the early morning of January 30. He said in recent years the Chinese government has accelerated construction of a new open economic system, further enlarged opening up, accelerated transform of the government functions, vigorously promoted reforms with streamlining administration and delegating power to the lower level as the focus, and explored the management mode of pre-access national treatment and negative list for the foreign investment in China (Shanghai) Pilot Free Trade Zone while enforcing protection of the legal rights and interests of foreign-funded enterprises and maintaining the foreign investment to a relative high level.
The growth in China was mainly driven by an increase in FDI in the service sector, while FDI to the manufacturing sector fell, particularly from Japan, and especially in industries that are sensitive to rising labor costs, according to UNCTAD.
James Zhan, Director of Investment and Enterprise at UNCTAD, said the inflows to China have showed structural changes from manufacturing to the service sectors and from labor intensive sector to technology intensive sectors.
This change of position is also partly impacted by chance factors.
Sun said in 2014 the US$130 billion mega-buy-back of shares by Verizon (United States) from Vodafone (United Kingdom) significantly reduced the equity component of FDI inflows to the United States, resulting in a sharp decline of US$86 billion of FDI of the United States in 2014. This deal also lowered the position of the United States from the first in 2013 to the third.
In short, this buy-back deal changed this part of foreign investment into domestic investment, indirectly resulting in decline of the net FDI of the United States.
Given the economic growth rate of the US is higher than most of the developed economies, it is expected that the United States will become the first choice of overseas FDI again, says Wall Street Journal.
In 2013, the FDI to the United States was as high as US$230.8 billion.
Of course it is also a big trend for the foreign investment shifting from the developed economies to the developing economies.
According to the report of UNCTAD, FDI flows to developed countries dropped by 14% to an estimated US$511 billion in 2014. In contrast, developing economies saw their FDI reaching a new high of US$700 billion, 4% higher than 2013, with a global share of 56%, a record high in history.
Of the Top 5 FDI recipients in 2014, only the United States is a developed economy. Hong Kong of China ranks the third place with US$111 billion of FDI while Singapore and Brazil rank the fourth and the fifth place.
In contrast, the escalating regional conflicts caused investors to lose confidence and the FDI in Russia plunged by 70% to an estimated US$19 billion.
Source: www.ce.cn, February 2, 2015
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