COVID Year Sees China Beat U.S. in FDI Inflows

The coronavirus pandemic majorly upset the flows of foreign direct investments in 2020 – with the result of China overtaking the U.S. as the largest recipient. While the annual inflow of FDI around the globe decreased by 42 percent compared with 2019, developed countries were hit hardest, seeing a decline of 69 percent. Despite major decreases, the U.S. got off comparably lightly at a loss of 49 percent, while European economies as a whole drifted into divestment territory.

China, which kept the virus mostly in check throughout the year, continued the gradual growth of its annual FDI volume. It was up 4 percent at $163 billion in 2020, just enough to kick the U.S. off the throne (at least for now). In 2020, the U.S. still received $134 billion in foreign direct investment, according to data released by the U.N. Conference on Trade and Development on Sunday. Due to the divestment of 4 billion U.S. dollars, Europe technically decreased its FDI inflow by more than 100 percent opposite 2019.

When it comes to FDI stock, the U.S. is still the undisputed champion of incoming investment at around $9.6 billion. China’s level is only at around $2 billion, but its perseverance in 2020 might have been enough for the country to claim the world’s third largest stock after Hong Kong, leaving behind the UK.

2015 and 2016 saw exceptionally high volumes of foreign direct investment in the United States. The momentary high was caused by so-called corporate inversions, in which multinational companies from the U.S. change their headquarters to a different country, thereby making investments in the U.S. side of the business a foreign inflow. The 2015/16 inversion flurry predated a tightening of restrictions by the Obama administration seeking to curb inversions which are carried out to avoid taxes.