World Economy

Developing Asia Becomes Main Source of Global FDI

Developing Asia Becomes  Main Source of Global FDIDeveloping Asia Becomes  Main Source of Global FDI

Developing countries in Asia became the world’s largest source of foreign direct investment (FDI) last year, overtaking the United States which remained the biggest single investor country.

Developing countries in Asia invested $440 billion abroad last year, eclipsing North American outward investment of $390 billion and $286 billion coming from Europe, a survey by the UN trade and economic think-tank UNCTAD showed on Monday, Reuters reported.

Global FDI outflows were estimated at $1.341 trillion last year, a 6.2 percent increase from 2013. FDI includes mergers and acquisitions abroad and foreign start-up projects, as well as money that is pumped into or out of such projects by owners overseas. FDI flows can signal economic confidence and may be a precursor to greater trade.

US firms invested $337 billion in 2014, 3 percent more than in 2013. Hong Kong and China were second and third largest investors, spending $150 billion and $116 billion respectively.

 China Top Destination

China overtook the United States to become the top destination for FDI in 2014, according to UNCTAD’s survey of FDI inflows, published in January.

FDI inflows into China reached $128 billion last year, while net US inflows fell by two-thirds to $86 billion, dragged down by a deal between US firm Verizon Communications Inc and its British partner Vodafone that reversed $130 billion of FDI out of the United States.

Chinese firms now invest almost as much overseas as foreign firms do in China, marking a huge shift over the past decade. In 2004, FDI inflows into China were 11 times greater than outflows.

But the complexion of FDI investments by firms from China, Hong Kong and other developing economies was very different to US or European FDI, the survey showed.

Most of the FDI coming from developing countries went into mergers and acquisitions, whereas 81 percent of the FDI from developed countries consisted of earnings reinvested in existing investments.

In 2014, China’s FDI spend was just ahead of Japan’s $114 billion and Germany’s $112 billion. Japanese investments fell after a three-year increase, continuing in North America but declining sharply in Asia and Europe, UNCTAD said.