China may outstrip US as largest FDI recipient: UNCTAI
( 2002-10-25 10:36 ) (8 )

The United Nations Conference on Trade and Development (UNCTAD) predicts that China may for the first time overtake the United States to become the largest Foreign Direct Investment (FDI) host country in the world.

According to preliminary estimates released here on Thursday, world FDI inflows in 2002 will decline by 27 percent to about 534 billion US dollars.

UNCTAD experts hold the view that the uncertain economic situation and weak stock market are undermining business confidence, with a sharp impact on cross-border mergers and acquisitions and corporate investment expansion plans.

Completed cross-border mergers and acquisitions in the first nine months of this year fell by 45 percent and the decline was particularly drastic in the United States, the largest recipient of FDI in 2001.

UNCTAD report said that these developments, especially the substantial decrease in FDI flows into the US, may conceivably lead to China supplanting the US this year as the single largest recipient of FDI inflows worldwide.

FDI growth in China continued its momentum at an estimated 50 billion US dollars, and inflows will probably set a record, said UNCTAD.

UNCTAD pointed out that driven by the liberalization process and industrial restructuring, and further accelerated by the country's accession to the World Trade Organization, China's FDI is experiencing faster growth in medium- and high-tech manufacturing industries and services.

In 25 developed countries, FDI inflows in 2002 could reach 349 billion US dollars, as compared to 503 billion dollars last year. However, in 10 of these countries, inflows are expected to be higher than in 2001.

According to the UNCTAD report, FDI flows into developing Asia are expected to decline further this year, by about 12 percent, following a 24 percent reduction in 2001. Inflows this year are likely to be 90 billion dollars.

FDI inflows into Latin America and the Caribbean will fall for the third year in a row, tumbling 27 percent from 85 billion dollars to 62 billion dollars this year.

UNCTAD is projecting a dramatic drop in FDI inflows to Africa, from 17 billion dollars in 2001 to 6 billion dollars this year, while central and Eastern Europe are set this year to repeat last year's 27 billion dollars in FDI inflows.