CBS Marketwatch: China beats U.S. as investment draw

China beats U.S. as investment draw
By Rachel Koning, CBS.MarketWatch.com
Last Update: 1:48 PM ET June 28, 2004


CHICAGO (CBS.MW) -- China has passed the United States as the recipient of the most foreign direct investment, luring $53 billion from developed countries in 2003, according to the Organization for Economic Cooperation and Development.


In all, as foreign capital flowed into emerging areas including China, developed countries saw investment slide 28 percent, to $384 billion last year from $535 billion in 2002, according to findings released Monday by the OECD, a group that tracks trade, economic and development issues for its 30 member countries.

The United States felt the biggest sting from a preference for headier, if often riskier, returns on development and investment in emerging markets. Investment flowing into the United States declined to $40 billion last year, down from $72 billion in 2002 and $167 billion in 2001.

This was the second consecutive year that the United States was a bigger provider of investment abroad compared to the investment it attracted.

Overall, a weak global economy in 2003, international security instability and a preference among firms to consolidate acquisitions rather than buy more companies contributed to falling direct investment among the OECD's 30 members.

By contrast, China offers investors the market size of developed nations, but developed areas in general can no longer entice business with the lower wages and production costs to be found in China, the group said. See more on the organization.

Foreign direct investment in China dipped only slightly, to $53 billion from $55 billion the year before, placing it as top recipient. The results typically exclude tax haven Luxembourg, which continues each year to draw vast capital flows.

India attracted $4 billion in foreign direct investment from OECD members in 2003. Russia lured just $1 billion, the lowest amount since the mid-1990s, as businesses were detracted by risks of regulation, the OECD said.

Among its European counterparts, France remained the biggest draw of foreign capital, seeing inflows of $47 billion in 2003, a sliver below that seen a year earlier -- but about three times the amount invested in Germany and the United Kingdom. It is relatively easier for foreign firms to buy French companies, at least conventional manufacturing, or "old economy" firms, than those in many other European countries, the OECD said.


Rachel Koning is a reporter for CBS.MarketWatch.com in Chicago.