The companies give up the United States and bet on China

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US direct investment by foreign companies fell 49 percent to $ 134 billion last year, according to a report released Sunday by the United Nations Conference on Trade and Development. In contrast, foreign direct investment in China increased by 4% to $ 163 billion in 2020.

2020 marked the first year in history in which foreign direct investment in China surpassed that of the United States, according to the UN. China is now the world’s largest beneficiary of foreign investment.

Although Covid-19 was a major factor in foreign direct investment that fell in the United States – and in most places around the world – the abandonment of US investment by foreign companies began long before the pandemic.

After reaching a maximum of $ 440 billion in 2015, according to the US Department of Commerce, foreign investment in the US fell sharply. Former President Donald Trump’s trade policies have affected foreign investment – especially in China, which has seen the sharpest decline in US investment in recent years. Growing economic uncertainty around the world has also contributed to the decline.

Last year, the decline in foreign direct investment in the US was the largest in the wholesale, financial services and manufacturing industries, the report said. International mergers and acquisitions, as well as US asset sales to foreign investors, fell 41%.

Meanwhile, China’s explosive economic growth – and rapid recovery from the pandemic – have helped foreign investment grow. China’s economy grew 2.3% last year, when most of the world’s major economies shrank. The country has implemented strict policies to block and track the population destined to contain the virus and has set aside hundreds of billions of dollars for major infrastructure projects to fuel economic growth.
China’s ability to control the spread of the virus “helped stabilize investment after the early blockade,” the report said.
Foreign direct investment to India has grown similarly, from less than $ 25 billion in 2014 – before Prime Minister Narendra Modi took power – to $ 57 billion last year, according to the UN report. Much of this growth has been caused by policies that have allowed global brands such as Ikea and Uniqlo to open stores, as well as Modi’s “Make in India” campaign to increase the country’s production base.

This helped India’s foreign direct investment grow by 13% last year.

Most of the savings were not so lucky. Foreign direct investment in the United Kingdom and Italy fell by almost 100%. Foreign direct investment in Russia fell by 96%, that in Germany fell by 61%, and that in Brazil fell by 50%. Australia, France, Canada and Indonesia – all among the top foreign direct investment beneficiaries in 2019 – also fell by two figures.

Overall, foreign direct investment fell by 42% last year to its lowest level since the 1990s – and by 30% below the lowest level reached during the 2008-2009 global financial crisis.

The attractiveness of the United States as a safe and robust place for foreign companies to invest has been one of the strongest driving forces behind America’s economic growth over the past few decades. But the UN has said that circumstances stopping the flow of foreign direct investment to the US and other countries will remain valid this year.

“The effects of the pandemic on investment will persist,” James Zhan, director of UNCTAD’s investment division, said in a statement. “Investors are likely to remain cautious in committing capital to new productive assets overseas.”

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