Taking advantage of China’s thriving economy and greater management of the Covid-19 pandemic, foreign companies are turning their backs on the United States. As per a report released Sunday by the United Nations Conference on Trade and Development, direct investment in the US by foreign companies fallen 49% to $134 billion last year. However, in China, foreign direct investment grew by 4% to $163 billion in 2020. According to the UN, 2020 became the first year in history when FDI in China outdid that of the US. China has emerged as the world’s largest recipient of foreign companies’ investments. It is also a fact that Covid-19 was a major aspect in foreign direct investment dipping in the US.
However, well before the pandemic, the drop-off in foreign companies’ American investments had started. As per the US Commerce Department, foreign investment in the US has been on a sharp downward slide, after hitting a high of $440 billion in 2015. In 2020, erstwhile President Donald Trump’s go-it-alone trade policies miffed foreign investment more so from China. Over the past few years, China represented the sharpest drop in US investment. Apart from this, rising economic ambiguity throughout the world also led to the decline. As per the report, last year weakening in foreign direct investment into the US was most prominent in wholesale trade, financial services and manufacturing.
International mergers and acquisitions along with sales of US assets to foreign investors plummeted by 41%. In the meantime, China’s volatile economic growth along with quick recovery from the pandemic helped foreign investment soar. At a time when most of the world’s major economies shrank, China’s economy grew 2.3% last year. China implemented strict lockdown and population tracking policies in order to contain the virus. Apart from this, it assigned hundreds of billions of dollars for major infrastructure projects to boost economic growth. As per the report, China’s aptitude to contain the spread of the virus “helped stabilize investment after the early lockdown.
As per the UN report, similar to China, foreign direct investment to India has skyrocketed to $57 billion last year from less than $25 billion in 2014. Major part of that growth was brought about by policies that empowered international brands like Ikea and Uniqlo to open up stores. Apart from this, Modi’s signature “Make in India” campaign helped to grow the country’s manufacturing base. Last year, that helped India’s foreign direct investment soar 13%.