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China Tops Global FDI Ranking: UNCTAD Investment Trends Monitor

China was the world’s largest recipient of foreign direct investment (FDI) in the first half (H1) of 2018, according to a recent report from United Nations Conference on Trade and Development (UNCTAD).

China received an estimated US$70.2 billion in H1 FDI inflows, up 6% from the same period in 2017. China’s strong inbound FDI growth is partially due to strong real estate and manufacturing inflows, which grew by 31% and 13% year to date through August, respectively. China’s “intrinsic advantages remain substantial: world-class infrastructure, an educated and still-cheap labor force, and, most of all, scale.” Despite a decline in United States FDI, China is still attractive for investors from places such as Hong Kong, Taiwan, Japan and Korea. Since 2014, they “have accounted for close to 80% of direct investment into mainland China, up from just 46% in 2008” (WSJ, 2018).

Against this bright backdrop, economic concerns continue to pervade the Chinese economy.  China is now facing its slowest economic growth numbers in a decade, a battered stock market, reports of massive off-balance-sheet debt, and an intensifying trade war with the United States. Lu Kang, spokesperson of the Chinese Ministry of Foreign Affairs, stated that “although China’s economic development is faced with some uncertainties both internally and externally, China’s economic fundamentals do remain sound in a long term.” China’s inward FDI growth does not paint a full economic picture, but is positive news in an otherwise turbulent global reality.

Global FDI fell 41% in H1 2018, when compared with H1 2017. This is largely attributed to U.S. tax reforms incentivizing the repatriation of accumulated foreign earnings by U.S. companies. According to UNCTAD investment chief James Zhanas, “American firms repatriated a net $217 billion from foreign affiliates”. The report states that uncertainty in trade relations and investment screening procedures are additional factors in global FDI decline.  

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