The tit-for-tat trade restrictions between China and the United States under the Trump administration, coupled with the coronavirus pandemic, have given China a surprising edge.
China has for the first time surpassed the United States as the top place for foreign direct investment, an important measure of a country’s economic health.
Foreign investment in the United States fell by almost half, or 49 percent, in 2020 to $134 billion, according to figures released on Sunday by the United Nations Conference on Trade and Development.
The decline in the United States mostly centers on overall trade, financial services and mergers and acquisitions, the study indicated.
China, where the coronavirus outbreak was first detected, notched a slight 4 percent rise to $163 billion, led by investments in the country’s growing high-tech sector and in mergers and acquisitions. China, the world’s most populous nation, ordered strict lockdowns and masking requirements, rules that appear to have helped contain the spread of the virus within its borders.
Foreign direct investment plunged for most countries as they struggled to contain the virus. Investment in Europe was wiped out, and globally, the flow of foreign investment altogether fell by 42 percent.
Developed nations such as the United States are typically attractive destinations for such investments because of their skilled work force, open markets and consistently enforced regulations.
For years, China’s manufacturing prowess and its rising consumer base have attracted foreign companies such as Apple, but its stringent guidelines around foreign ownership of its companies and its sometimes unclear enforcement rules made such investments tricky.
But the surging clout of consumers has been hard for multinational corporations to ignore. As foreign investors set up shop, Chinese citizens bought and created enormous wealth. The country is stutter-stepping its way from becoming an economy driven by manufactured exports to one driven by its own consumers.
The United Nations group expects foreign direct investment across the globe to remain weak for 2021. (Source: Nytimes.com)