China largest FDI recipient in 2020 amidst global plunge: UNCTAD report

China was the largest recipient of foreign direct investment in 2020 as the coronavirus outbreak spread across the world during the course of the year, with the Chinese economy having brought in US$163 billion in inflows.

China’s high-tech industries saw an increase of 11 percent in 2020, and cross-border mergers and acquisitions rose by 54 percent, mostly in information and communications technology and pharmaceutical industries, a new report by the United Nations Conference on Trade and Development showed on Sunday.

FDI flows to China rose by 4 percent to US$163 billion, compared to US$134 billion attracted by the United States.

“A return to positive gross domestic product growth and the government’s targeted investment facilitation program helped stabilize investment after the early (coronavirus) lockdown,” James Zhan, UNCTAD’s director of investment and enterprise, said in a virtual press conference.

“The global dependence on the supply chains of multinational enterprises in China during the pandemic also sustained the FDI growth in China,” he added.

The country saw its GDP increase 2.3 percent last year and is expected to be the only major economy to post growth in the pandemic-ravaged year, according to the National Bureau of Statistics.

Overall, global FDI had collapsed in 2020, falling by 42 percent to an estimated US$859 billion, from US$1.5 trillion in 2019, the Geneva-based UN trade and development body said in its latest Investment Trends Monitor.

“FDI finished 2020 more than 30 percent below the trough after the global financial crisis in 2009 and back at a level last seen in the 1990s,” the report said.

The data showed that the decline was concentrated in developed countries, where FDI flows fell by 69 percent to an estimated US$229 billion, the lowest level in 25 years.

Flows to Europe dried up completely, tumbling by two-thirds to minus US$4 billion, it noted. In Britain, FDI fell to zero, and declines were recorded in other major European recipients. A sharp decrease of 49 percent to US$134 billion was also recorded in the United States.

The decline in developing economies was relatively measured at 12 percent to an estimated US$616 billion, the report showed.

FDI flows fell by 37 percent in Latin American and the Caribbean, by 18 percent in Africa, and by 4 percent in developing Asia.

Looking ahead, UNCTAD warned that the global FDI trend is expected to remain weak this year.

“Risks related to the latest wave of the pandemic, the pace of the roll-out of vaccination programs and economic support packages, fragile macro-economic situations in major emerging markets, and uncertainty about the global policy environment for investment will all continue to affect FDI in 2021,” it wrote.

While sharply lower greenfield project announcements suggest that a turnaround in industrial sectors is not yet in sight, UNCTAD however stressed that strong deal activity in technology and pharmaceutical industries could push M&A-driven FDI flows higher.

“The global FDI is likely to follow a U-shape recovery, unlike the global trade and GDP which have been predicted to be a V-shape recovery starting already 2021.