China Overtakes the U.S to become the Top FDI Destination

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China emerges as the top destination for Foreign Direct Investments. The raging Covid-19 pandemic has accelerated the shift of investments towards the Eastern hemisphere of the world. According to the figures released by the United Nations on Sunday, the U.S lost its ace position in the FDI race to China during the course of 2020.

Analyzing the Trend

The statistical data released by the U.N suggests that new investments by overseas businesses into the U.S fell 49% in 2020. China had long held the second position in the FDI race and witnessed a 4% rise in the direct investments by foreign companies. This was revealed at the United Nations Conference on Trade and Development. The prompt response of the country to the Covid-19 crisis is one of the reasons for this rise in FDIs. Beijing used strict lockdowns to largely contain Covid-19 after the disease first emerged in a central Chinese city, and China’s gross domestic product grew even as most other major economies contracted last year.

Importance of the Uno Position

The significance of this augmentation in the ratio of foreign investments in the country point toward the shift of the Chinese economy towards becoming the global economic center- a position long dominated by the U.S economy. China has cemented its position as the world’s factory floor and expanded its share of global trade. While China attracted more new inflows last year, the total stock of foreign investment in the U.S. remains much larger, reflecting the decades it has spent as the most attractive location for foreign businesses looking to expand outside their home markets.

In 2016, the United States witnessed a peaking of its FDI numbers. At $472 billion, the US recorded the highest FDI ever. During the same period, China’s comparative FDI numbers were quite abysmal- at merely $134 billion. Since this historic moment, FDI in China has continued to steadily rise, while the FDI rate in the U.S has continued to gradually decline over the years. In China, the flow of investments by multinational companies continued despite the upheavals of the pandemic, with companies from U.S. industrial giant Honeywell International Inc. and German sportswear maker Adidas AG expanding their operations there.