New investments by foreign companies in the United States – which occupied the forefront for decades – decreased by 49% in 2020, as the country struggles to limit the spread of the Corona virus amid the economic recession, according to United Nations figures issued last Sunday.
Writers Paul Hannon and Eun Young Jung said in a report published in the American Wall Street Journal that China – which ranked second for a long time – recorded an increase in foreign direct investment by 4%, according to the United Nations Conference on Trade and Development.
Beijing resorted to strict lockdowns to contain Covid-19 after the virus first appeared in Wuhan, and the country’s GDP grew, at a time when most other major economies were struggling over the past year.
The investment figures for 2020 confirm China’s transformation into the center of the global economy that has long been dominated by the United States, a shift that accelerated during the pandemic as China strengthened its position as the world’s factory and expanded its share in global trade.
Even as China attracted more new investment inflows in the past year, the total foreign investment reserves in the United States are still much larger, reflecting decades of its decades-long ranking on the list of most attractive destinations for foreign companies looking to expand outside their home markets.
The administration of former US President Donald Trump encouraged American companies to leave China and return to the United States, and subjecting the acquisitions of Chinese companies in the United States to scrutiny for reasons of national security reduced the interest of Chinese investors in US deals.
Decline in investment in the United States
According to Daniel Rosen, co-founder of the Rhodium Group, an independent research group based in New York, the sharp decline in foreign investment in the United States over the past year reflects the broader economic downturn of the repercussions of the Coronavirus pandemic.
Foreign direct investment includes building new factories, expanding existing operations in a country, or acquiring local companies.
In China, the influx of investment by multinational companies continued despite the disruptions caused by the epidemic, with companies such as the American giant Honeywell and the German company, adidas, expanding their operations in their territories.
For his part, Joseph Joyce, professor of international relations and economics at Wellesley College, believes that the sharp decline in foreign investment in the United States was due to the epidemic, but that it is also pushing companies to rethink future investments, as companies reassess their policies on global supply chains and foreign markets. , And how to employ technology.
The figures of the United Nations Conference on Trade and Development show a clear disparity between East and West in the global economy. In 2020, East Asia attracted a third of foreign investment in the world, which is its largest share since the eighties. The demand for digital services is so high.
On the western side, the European Union witnessed a decline in foreign direct investment by 71%, and the United Kingdom and Italy – which recorded high mortality rates and high economic contraction rates – did not attract any new investments, and Germany – whose performance is better than its peers – witnessed a decline in foreign investment. By 61%.
When the epidemic first spread at the beginning of last year, the United Nations Conference on Trade and Development predicted that China would witness a remarkable decline in foreign investment, and that the United States would not be greatly affected.
In contrast, the Chinese economy began to recover its activity in aLast April, the United States and Europe announced a series of closures and increased unrest.
China is attracting foreign companies
China’s rapid economic recovery and its increasing attractiveness to foreign investment is due to Beijing’s ability to control the Corona virus within its borders quickly, and after the decline in foreign direct investment in China during the first few months of 2020, Chinese officials rushed to reassure foreign investors.
Last March, Chinese Prime Minister Li Keqiang called on the cabinet to pursue targeted policies to stem the decline in foreign trade and foreign investment.
With China recovering from the repercussions of the epidemic, foreign companies rushed to pump more of their money into China, as it is an important production base and market for the growth of their products.
Walmart announced at an investment conference hosted by the city government in Wuhan that it would invest the equivalent of $ 460 million in the city over the next five years.
The company will invest “Starbucks” (Starbucks) $ 1 million to build a roasting plant and a park in the eastern city of Kunshan.
For its part, Tesla is expanding its business at its Shanghai plant by adding a research facility.
The spread of the Corona virus contributed to boosting the activity of medical and pharmaceutical investments in particular, and the Chinese state-run Central Television reported last April that many international pharmaceutical companies are moving forward to expand their business in China, including AstraZeneca, which is in the process of Establish regional headquarters in at least 5 Chinese cities.
The two writers pointed out that the flexibility of foreign investment in China contradicts previous expectations about foreign companies seeking to reduce their heavy dependence on China as an essential part of their supply chains, after experiencing some turbulence due to tariffs in the midst of the trade war between it and the United States.