In 2020, foreign direct investments (FDI) sank worldwide as the pandemic brought economies to a stand-still. However, China was among the exceptions, bringing in the highest amount of FDI globally.
According to the research data analyzed and published by Comprar Acciones, China’s inflows in 2020 amounted to $163 billion. That was an increase of 9% from 2019 when the country received $140 billion. This stunning performance saw China surpass the United States as the top recipient of foreign direct investment worldwide. For the US, its 2020 total FDI amounted to $134 billion in 2020, down by 49% from the $251 billion it received in 2019.
Global FDI tanked nearly as much as in the US, shedding 42% year-over-year (YoY). From a total of $1.49 trillion in 2019, it fell to approximately $859 billion in 2020. The annual total was 30% lower than the one reported during the 2009 financial crisis.
Developed countries bore the brunt of the decline as FDI flows sank by 69% YoY to $229 billion. In Europe, the drop was particularly severe as inflow completely stalled to -$4 billion, a decline of more than 100%. On the other hand, the impact was relatively muted in developing economies, which sank by 12% to $616 billion. By the end of the year, developing economies accounted for 72% of global FDI, the highest share on record. For transition economies, there was a 77% decline to $13 billion.
Across various developing regions, the performance was uneven. Latin America and the Caribbean saw the highest decline at 37%. In Africa, there was an 18% drop while in developing Asia, the fall was a mere 4%. East Asia ended the year as the largest host region as it accounted for a third of the global FDI.
India’s FDI Soars by 13% as UK and Italy Post Over 100% Drop
India, which is among the top-rated recipient economies, had the highest YoY growth, posting an increase of 13%. UNCTAD attributed the country’s performance to a boom in digital sector investments during the year.
The highest drop among top economies was the over 100% decline in the UK (-$1.3 billion) as well as in Italy. Russia was not spared either as inflows declined by 96%. In the US, the halving of investment inflows resulted from huge declines in cross-border mergers and acquisitions. There was also a considerable fall in greenfield investments.
A handful of countries in Europe posted growth in spite of the regional crisis. Sweden saw its inflows more than double, reaching $29 billion, from $12 billion in 2019. In Spain, there was a 59% increase.
Moreover, despite being the first country to get hit by the pandemic, China managed to stem the spread within its borders. According to data from John Hopkins University, it had less than 100,000 confirmed cases and about 4,800 deaths from Covid-19. Comparatively, the US, whose population is lower than that of China had close to 25 million cases and over 400,000 fatalities.
China bore the brunt of the disease much better than its peers. According to data from the National Bureau of Statistics, its GDP rose by 6.5% in Q4 2020. Overall, China reported a 2.3% growth in GDP for the whole of 2020, the only major economy with a positive growth rate.
Chinese Stock Market Saw 18 Million New Investors in 2020
Investors took note of the growth in China as illustrated by the level of interest seen in its stock market. According to China Securities Depository and Clearing, there were 18.02 million new investors in the mainland stock market in 2020, bringing the total to 177.77 million.
In aggregate, that translated to about 1.5 million new investors in the market every month. In the month of December 2020 alone, there were 1.62 million new investors. The figure more than doubled the 809,300 reported in December 2019.
The reason behind the massive surge of interest was the stellar performance of China’s mainland stocks during the year. To illustrate, the Shenzen Component grew by 38.7% YoY in 2020, compared to the S&P 500’s 16.26% growth over the same period. The CSI 300 was another top performer, recording gains of 27.2% during the year.
New listings by Chinese companies also flooded the market, giving investors more options to pick from. According to Ernst & Young, IPO deal volume in mainland China and Hong Kong represented a 40% share of the global tally in 2020.
Lastly, Shanghai Stock Exchange ended the year in first place with a total of 233 IPOs and Shenzen ranked third, behind Nasdaq.