October 24, 2012 / 9:16 AM / 7 years ago

China tops U.S. as investment target in 1st half 2012: U.N. agency

BEIJING (Reuters) - China overtook the U.S. as the world’s top destination for foreign direct investment in the first half of 2012, according to the United Nations Conference on Trade and Development (UNCTAD).

A China Central Television (CCTV) helicopter flies over the Chinese national flag in Tiananmen Square October 9, 2012. REUTERS/David Gray

China absorbed $59.1 billion in foreign direct investment (FDI) in the first six months, down slightly from $60.9 billion a year earlier, the agency said in a report.

The United States attracted $57.4 billion in 2012’s first half, down 39 percent from a year earlier, it said.

During 2011, the U.S. received $227 billion in FDI while China attracted $116 billion, according to UNCTAD.

The third biggest recipient of FDI in the first half of this year was Hong Kong, with $40.8 billion. The report said the third biggest in 2011 was Belgium, with $102 billion.

In the first half of this year, developing economies received half of all FDI flows, matching the developed world for the first time, the report said, though the shift in the balance was driven by declines in FDI going into the U.S. and the European Union.

Global foreign direct investment inflows fell 8 percent in the first half of this year to $668 billion compared with a year earlier, the report concluded.

“This reflects a protracted period of weak external demand with consequent strongly negative effects on exports and increasing uncertainty about high-growth emerging countries,” the report said.

A slowdown in the volume of cross-border mergers and acquisitions also helped drive the first-half decline, the report said.

It said that “early indications show that FDI flows to the United States might be stronger in the second half of 2012.”

China’s Ministry of Commerce reported last Friday that China attracted $83.4 billion in FDI between January and September, down 3.8 percent from a year earlier.

Beijing is seeking to attract investment that will help it restructure its economy away from the low-cost manufacturing, which has driven rapid development for the past three decades, and into higher value-added enterprises.

That in turn has pushed investors seeking low-cost labor to invest in other developing markets.

“China is experiencing structural adjustments in their FDI flows, including the relocation of labor-intensive and low-end market-oriented FDI to neighboring countries,” UNCTAD said.

Reporting by China Economics Team; Editing by Richard Borsuk

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