GENEVA — Foreign direct investment in China in 2006 fell by 3.3 percent, to $70 billion, while the U.S. regained the top spot as the world’s most attractive country for foreign investment, according to a United Nations report.
FDI to the U.S. rose by 78.2 percent, to $177.3 billion, partly spurred by the weak dollar, which made acquisition of assets cheaper. The huge inflows helped the U.S. overtake the U.K., which in 2006 dropped to second place with an FDI increase of 3.2 percent, to $169.8 billion.
Globally, foreign investment last year expanded by 34 percent to $1.2 trillion, assisted by a robust global economy and large cross-border mergers and acquisitions in rich countries. Senior U.N. investment analysts downplayed the contraction in China and said they viewed the results as a return to normal after the record $72.4 billion in 2005.
“True, it is a reduction, but it’s still at a high level,” said Anne Miroux, chief of investment issues analysis at the U.N. Conference on Trade and Development and lead author of the preliminary FDI estimates for 2006.
Miroux said China remained a “huge pole of attraction” and noted that given the rapid growth of the 1.3 billion-person economy, she expected the underlying investment trend to remain strong.
Foreign investment in China, which began to increase substantially in the late Nineties in anticipation of China’s entry into the World Trade Organization, took off after China joined in December 2001.
UNCTAD’s estimates show that foreign investment hugely increased in economies with major textiles and apparel exporting sectors such as India and Turkey. In 2006, investment in India, which in recent years has been averaging economic growth rates of between 7 and 8 percent, increased by 44.4 percent, to $9.5 billion.
Miroux said the increase in India reflected the “clear liberalization path” of the government and the opening up to FDI sectors that were formerly closed, such as retail trade. Miroux added that while the world’s second-largest country was opening up, it still had a far way to go to catch up with other, more competitive economies in Asia.
The U.N. report shows investment in Turkey last year grew by 76.3 percent, to $17.1 billion, and in Romania increased 34.1 percent, to $8.6 billion, in anticipation of its entering the European Union on Jan. 1.
But investment last year in Indonesia, South Korea and Mexico was disappointing.
Investment in Mexico remained unchanged from the year before at $18.9 billion, and FDI in Indonesia fell by 62.9 percent, to $2 billion. Korea also contracted by 92.6 percent to just $500 million.