Changes in foreign direct investment in the world – to get out of balance

Let us try to analyze another aspect of the processes of globalization, that is related to the direction of direct investments inside and outside at the global level. The dynamics of the phenomenon appears, among other things, to be important in connection with some important changes that are taking place in the world.

Two weeks ago we published on the same site an article about some of the last moments of the processes of globalization, in particular an attempt to analyze the attempts of the United States to change some fundamental aspects with the aim of impeding the economic, technological and political rise of China.

UNCTAD, an agency of the United Nations, has recently, like every year, published its analyzes on the subject, rich in data and commentary (Unctad, 2022); From this post we try to extract some of the most important information, noting that the report was given very little space in the national media.

The first news we extract from the same report is that in 2021 foreign direct investments worldwide amounted to about 1,580 billion dollars; This is an increase of 64% compared to the previous year, when it was placed just under 1 trillion, a number that also recorded a significant decrease compared to 2019, due in particular to Covid. However, despite the sharp increase in the year, we are still quite a long way from the peak of the phenomenon in 2015-2016, when there was a peak in value, where the annual figure exceeded $ 2000 billion.

Unctad asserts that the recovery in investments is unfortunately due in particular to mergers and acquisitions and other financial transactions, while the share of new productive investments (Greenfield) turned out to be less important. Moreover, this trend appears to be in line with the general trend towards the development of financial capitalism, especially in the West, at the expense of creating new investments in physical capital (Blanqué, 2022).

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Another aspect highlighted by the report is that investments going to emerging countries are now greater than those flowing to rich countries ($837 billion in the first case in 2021 compared to $746 billion in the second case).

UNCTAD also warns that the outlook for 2022, especially given the Ukraine issue, looks rather negative and that at the end of the year the numbers will decline, if not stagnate at most.

If we now come to specific investment destination countries, then the United States and China (including Hong Kong), together, account for 435 billion dollars in 2020, 44% of the total phenomenon, and in 2021, 689 billion, still 43% . , they dominate the scene with their exhausted presence, as it was all too easy to imagine.

In particular, in 2020, China (always including Hong Kong) overtook the United States (284 billion against 151), perhaps a reflection of the fact that the country had recovered before the United States from Covid, while in 2021 the latter took the lead , with 357 billion against 322. However, it should be noted that in recent years China has quickly regained its positions in the world rankings, starting from a rather low level. And this is in the context of a more general process that now sees the Asian continent accounting for at least 40% of the total phenomenon, which is another sign of the change in the global balance. Among other things, about 40% of global industrial production is now concentrated in a circle with a diameter of only 1,000 km which includes the triangle formed by Beijing, Hong Kong and Tokyo (Hiault, 2022).

Among other things, only seven emerging countries and three developed countries appear in the top ten in the ranking (but including only Russia in the last category, otherwise it goes to two).

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and Europe? And in this case, too, our continent is in a rather poor position, which indicates the dearth of its attractiveness now for foreign capital; Looking at the numbers, in fact, we find only the first European country in the ninth place, … Russia, with investments of $ 38 billion in 2021 (in the current year, it is assumed that foreign investments in the country will be much less … .); Then only Germany came in 11th place, with 31 billion, and the United Kingdom in 13th place, with 28. Italy is not included in the top 20, while it has the lowest share of direct investment in GDP among developed European countries; Perhaps only Greece is the worst.

It may be little consolation that even France was not included in the top 20, a somewhat surprising finding considering that until just a few years ago the trans-Alpine country was one of the preferred destinations for foreign investment. Japan doesn’t offer a much better number, ranking only eighteenth.

By the way, it can be recalled that in recent weeks Ernst & Young published its annual review of the most attractive countries for investments in renewable and clean energy (Giliberto, 2022). Also in this case, the United States and China are at the top of the ranking (the first place of the USA seems doubtful in many ways), while Italy has fallen from the already unexciting 13th place in 2020 to the 13th. 15th in 2021, it was also surpassed by countries such as Chile, Brazil and India.

But let’s get back to the Unctad ranking. As for the countries of origin of direct investments, in this case, the dominance of American companies is still very strong, reaching $400 billion in 2021, even if China is growing rapidly on this front as well, reaching about 232 billion per year. But it may seem that China’s race has been bogged down by the many obstacles that Western countries impose on investment from the Asian country. We remember, for example, how the Draghi government in Italy, a very loyal Atlanticist, rejected many of them recently, even when they presented a completely harmless aspect to the security of our country. Moreover, the US is now preparing to pass a law that would also impose a certain curb on US direct investments in the Asian country. By the way, about 150 Chinese companies are preparing to leave the New York Stock Exchange due to restrictions on their listing by the US government.

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Of great importance on the foreign investment front are the positions of Germany, at 152 billion and Japan at 147. More generally, direct investment spending by developed countries still accounts for about of the total today. Thus it can be said that the majority of the resources come from the rich countries while they are directed, in the majority always, to the developing countries. The passage of the stick.

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The texts contained in the article

– Blanqué P., La croissance worldwide plus forcément avec cells du commerce mondial, Why EchosJune 13, 2022
-Giliberto J., Renewables, Italy is losing strength in attracting investments, sun 24 hoursJune 10, 2022
– Hewlett R. Why Echos11 June 2022
-Unctad, World Investment Report 2022Unctad, Geneva, 2022

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