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05 December 2019

Foreign direct investment into China jumps despite trade war

China is the biggest foreign investment recipient for the third consecutive year, but the analysts warned that a slowdown may be on the horizon.

Bloomberg/Qilai Shen

Foreign direct investment (FDI) into China jumped last year to $139 billion even as trade tensions escalated, bucking a trend that saw global flows sink 13 per cent from 2017 levels, reported Bloomberg.

According to a report by the United Nations Economic and Social Commission for Asia and the Pacific, “While global foreign direct investment declined to $1.3 trillion last year, inflows into China rose 3.7 per cent from 2017.”

The report also showed that for the first time, Asia-Pacific was both the largest destination and source of FDI globally, with China remaining the biggest recipient of inflows despite the trade war with the US

 “As it takes time for businesses to diversify their capacity outside of China in order to respond to the trade tensions, the longer the trade war between the US and China continues, the higher the probability that there will be a slowdown in inward FDI,” said the report.

The report also cautioned that sluggish growth in inward greenfield investment may hamper Asia-Pacific’s ability to maintain such levels of investment in the near term.

The report said that a decline in investment flows in 2020 is expected if both the uncertainty related to international trade continues and companies consolidate their value chains.

 Additionally, investment prospects for the region are said to remain tied to unfolding risks of ongoing global political and economic disturbances.


RELATED STORIES: US-China trade tension Foreign direct investment





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