The United Nations Conference on Trade and Development has published a report that suggests China generated $163 billion in direct investments last year compared to the United States which recorded a direct investment of $134 billion. Analysts explain that the United States revenue declined by 49% in 2020 while that of China increased by 4% last year, CNN reports.
What this means is that foreign investors are turning to China because of its booming economy and effective handling of the COVID-19 crisis, while they are dumping the United States for obvious health and economic reasons. The year 2020 was the first time that China would overtake the US in terms of direct foreign investment, and up till the moment, China remains the only country with the largest foreign companies’ investments in the world.
In 2019, the US generated $251 billion in direct investments while China received $140 billion inflows.
As the COVID-19 pandemic decimated the economies of most countries around the world, foreign investments in the United States had begun to taper off well before the pandemic began. The US hit a record $440 billion in direct foreign investments in 2015, but it has remained steadily on the decline since then. Meanwhile, former President Donald Trump’s unfriendly trade policies with China and his hard stand on economic issues contributed to the slump of indirect investments over the past several years, CNBC writes.
According to the UN Conference on Trade and Development report, the United States suffered fewer investments in 2020 in the areas of manufacturing, wholesale trade, and financial services, while business acquisitions, global mergers, and the sale of US assets to foreigners dropped by 14%. Conversely, the economy of China exploded by 2.3% in 2020 even though the fortunes of major countries around the world plummeted, while the Asian giant also allowed billions of dollars for major projects that would drive economic gains.
The ability of China to effectively manage the COVID-19 pandemic and create a favorable environment for foreign direct investments after the country’s initial lockdown drove economic growth that helped it surpass that of the United States. Economic analysts said America has enjoyed tremendous prosperity for many decades because of the heightened inflow of foreign direct investments from various countries. But then, the continuous spread of coronavirus in the country is driving investors away and this problem will linger for some time to come, experts said.
“The effects of the pandemic on investment will linger,” said James Zhan, director of UNCTAD’s investment division. “Investors are likely to remain cautious in committing capital to new overseas productive assets.”