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Tuesday, October 27, 2020, 23:15
UNCTAD: Global FDI halved in H1, flows to China 'resilient'
By Xinhua
Tuesday, October 27, 2020, 23:15 By Xinhua

GENEVA - The UN trade and development body on Tuesday said global foreign direct investment (FDI) dropped by nearly half in the first six months of the year, with the biggest declines in Europe and the United States, while FDI flows to China proved "relatively resilient."

READ MORE: UNCTAD: Global FDI to plunge as much as 40% this year

In its latest Global Investment Trends Monitor, the Geneva-based United Nations Conference on Trade and Development (UNCTAD) said that global FDI flows in the first half of 2020 reached US$399 billion, down 49 percent compared to 2019 as lockdowns around the world slowed existing investment projects.

It warned of a highly uncertain outlook depending on the duration of the pandemic and the effectiveness of policy interventions.

It also warned that the prospects of a deep recession had led many multinational enterprises to re-assess new projects.

The UN trade and development body said in its latest Global Investment Trends Monitor report that FDI flows to China proved "relatively resilient." In the first half, flows to the country reached US$76 billion, a 4 percent decline

For the full year, UNCTAD said that the outlook remained in line with earlier projections of a 30-40 percent decrease.

"The rate of decline in developed economies is likely to flatten as some investment activity appears to be picking up in the third quarter. Flows to developing economies are expected to stabilize, with East Asia showing signs of an impending recovery," the report said.

"The outlook remains highly uncertain, depending on the duration of the health crisis and on the effectiveness of policy interventions to mitigate the economic effects of the pandemic. Geopolitical risks also continue to add to the uncertainty."

For the first six months of the year, UNCTAD's data showed that new greenfield investment project announcements dropped by 37 percent, cross-border mergers and acquisitions (M&A) fell by 15 percent, and newly announced cross-border project finance deals, an important source of investment in infrastructure, declined by 25 percent.

In terms of geographical breakdown, developed economies saw the biggest fall, with FDI reaching an estimated US$98 billion in the first half, a decline of 75 percent compared to 2019.

The new figures also showed that the trend was exacerbated by sharply negative inflows in European economies, and that FDI flows to North America fell by 56 percent to US$68 billion.

FDI flows to developing economies decreased by a less than expected 16 percent, UNCTAD said, with flows 28 percent lower in Africa, 25 percent in Latin America and the Caribbean and 12 percent in Asia, mainly due to resilient investment in China.

The report said that FDI flows to China proved "relatively resilient." In the first half, flows to the country reached US$76 billion, a 4 percent decline.

ALSO READ: China's FDI rises 5.8% to over 940b yuan in 2019

The lower-than-expected decline was cushioned by an 84 percent rise in the value of M&A transactions, mostly in information services and e-commerce industries, explained James Zhan, UNCTAD's director of investment and enterprise.

Zhan added that government investment facilitation measures focusing on greenfield investment projects had helped to stabilize investment activities.

UNCTAD last month warned of a "lost decade" and forecast the global economy to contract by 4.3 percent this year, while expecting a return to positive territory with a gross domestic product growth rate of 4.1 percent in 2021.

The next regular issue of UNCTAD's Investment Trends Monitor will be released in mid-January 2021. 

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