China became the world’s top destination for foreign direct investment in 2014, dethroning the United States, The Wall Street Journal reported, citing data released Thursday by the United Nations Conference on Trade and Development (UNCTAD).
Foreign businesses invested US$127.6 billion in China, 3 percent more than in 2013, while their investments in the US — which had held the top spot for the past decade — fell to US$86 billion from US$230.8 billion, leaving it in third place.
Hong Kong also vaulted past the US, with foreign direct investment of US$111 billion. Singapore was in fourth place, with US$81 billion, UNCTAD’s figures show.
China’s ascent is part of a longer-term trend in foreign investment away from developed and toward developing economies, which attracted 56 percent of all overseas investments by businesses last year, up from 52 percent in 2013 and double their share before the financial crisis began in 2008.
It must be noted that some may find UNCTAD’s definition of developing economies, which includes Hong Kong and Singapore, somewhat eccentric.
“China has been steady with modest growth over the past few years, and it is expected to continue,” the newspaper quoted James Zhan, director for investment and enterprise at UNCTAD, as saying.
“There have been structural changes in inflows to China, from manufacturing toward services, and from labor-intensive to tech-intensive.”
But China might not have displaced the US had it not been for Verizon’s purchase of US$130 billion worth of shares in a joint venture from Britain’s Vodafone, the newspaper said. The transaction counted as a reduction in foreign investment in the US.
Worldwide, overseas investments by businesses fell 8 per cent from 2013 to US$1.26 trillion, the lowest level since 2009, during the global financial crisis.
UNCTAD said it doesn’t expect a significant recovery in foreign investment this year.
“The fragility of the world economy, with growth tempered by hesitant consumer demand, volatility in currency markets and geopolitical instability will act as a deterrent for investors,” it said.
“The decline in commodity prices will also lower investments in the oil and gas and other commodity industries.”
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