Foreign direct investment in China outstrips US in H1

PUBLISHED : Wednesday, 24 October, 2012, 5:50pm
UPDATED : Wednesday, 24 October, 2012, 6:07pm

China overtook the US as the world’s top destination for foreign direct investment in the first half of this year, according to the United Nations Conference on Trade and Development (UNCTAD).

China absorbed US$59.1 billion in foreign direct investment (FDI) in the first six months, down slightly from US$60.9 billion a year earlier, the agency said in a report.

The United States attracted USUS$57.4 billion this year’s first half, down 39 per cent from a year earlier, it said. During last year, the US received US$227 billion in FDI while China attracted US$116 billion, according to UNCTAD.

The third biggest recipient of FDI in the first half of this year was Hong Kong, with US$40.8 billion. The report said the third biggest last year was Belgium, with US$102 billion.

In the first half of this year, developing economies received half of all FDI flows, matching the developed world for the first time, the report said, though the shift in the balance was driven by declines in FDI going into the US and the European Union.

Global foreign direct investment inflows fell 8 per cent in the first half of this year to US$668 billion compared with a year earlier, the report concluded.

“This reflects a protracted period of weak external demand with consequent strongly negative effects on exports and increasing uncertainty about high-growth emerging countries,” the report said.

A slowdown in the volume of cross-border mergers and acquisitions also helped drive the first-half decline, the report said.

It said that “early indications show that FDI flows to the United States might be stronger in the second half of this year.”

China’s Ministry of Commerce reported last Friday that China attracted US$83.4 billion in FDI between January and September, down 3.8 per cent from a year earlier.

Beijing is seeking to attract investment that will help it restructure its economy away from the low-cost manufacturing, which has driven rapid development for the past three decades, and into higher value-added enterprises.

That in turn has pushed investors seeking low-cost labour to invest in other developing markets.

“China is experiencing structural adjustments in their FDI flows, including the relocation of labour-intensive and low-end market-oriented FDI to neighbouring countries,” UNCTAD said.