China overtook the United States to become the largest recipient of foreign direct investment in 2020, seeing asset flows grow by 4 percent to $163 billion total as the United States witnessed a 49 percent drop, closing out the year with $134 billion total, the United Nations Conference on Trade and Development (UNCTAD) Investment Trends Monitor has reported.
According to the agency’s figures, global investment dropped 42 percent, from $1.5 trillion in 2019 to $859 billion in 2020, the lowest level since the 1990s, and over 30 percent below the drop seen in the aftermath of the 2008 financial crisis.
UNCTAD expects FDI to continue a precipitous decline in 2021, with investment predicted to drop another 5-10 percent through the year due to the lingering impact of the downturn in economic activity.
Europe’s FDI suffered an even more catastrophic drop than the US, finishing the year with a balance of negative $4 billion. The United Kingdom, meanwhile, saw FDI drop to zero, while Australia saw foreign asset inflows drop by 46 percent, to $22 billion.
Overall, developing Asian nations, Africa and Latin America and the Caribbean saw FDI decline by 4 percent, 18 percent and 37 percent, respectively.
China was not the only winner in the investment rebalancing act, according to the UNCTAD’s figures, with lockdown-free Sweden seeing flows more than double, from $12 billion in 2019 to $29 billion in 2020. Japan, which also resisted hard lockdowns introduced by many other developed countries, also saw its FDI grow, from $15 billion to $17 billion.
Israel, which joined the US and Europe in stricter lockdowns, nevertheless saw FDI grow, from $18 billion to $26 billion, with analysts attributing this to large-scale inflows into Israeli high-tech firms working on everything from remote work applications to military, security products and e-commerce, including a range of programmes using artificial intelligence. India also saw a 13 percent growth in FDI, also due to investments in the digital sector, according to UNCTAD.
The economic downturn caused by the coronavirus crisis has led to a major restructuring of financial power among countries and a redistribution of wealth within many nations, with the world’s wealthiest seeing their fortunes grow by hundreds of billions of dollars even as ordinary people have suffered widespread job loss, the threat of evictions, and, in some countries, bankruptcies due to lack of health care.
