The 'Asianization' of global FDI
- By Dan Steinbock
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E-mail China Daily, August 27, 2013
Through the postwar era, the US, Western Europe and Japan dominated global foreign direct investment (FDI) inflows. Today, these inflows are entering an era of "Asianization."
The global foreign direct investment (FDI) inflows peaked at more than $2 trillion in 2007, before the global financial crisis. As the US subprime market collapsed, the crisis spread to other major advanced economies and global FDI inflows shrank to $1.2 trillion in 2009.
During a brief rebound, global FDI was driven by stimulus packages and recovery measures in the advanced world. But as these policies expired, so did the rebound. Global FDI inflows plunged again to less than $1.4 trillion in 2012.
Currently, observers anticipate a gradual rebound to almost $1.8 trillion around 2012-2015, but their forecasts presume a return to "business as usual." In view of present realities in the West, that is optimistic.
By 2012, the FDI inflows into developing economies had surpassed those of the developed economies for the first time. In the process, global FDI is becoming increasingly Asian.
Historically, FDI in Asia has steadily increased, but there are great differences within Asia and between countries. While FDI stocks illustrate historical trends, FDI flows describe current realities. In Asia, FDI stocks grew slowly until the 1990s. But they have soared since the early 2000s, not least because of China's entry into the World Trade Organization.
In the past three decades, FDI in Asia has been a game of three groups of economies. First, Hong Kong, the Chinese mainland and Singapore accounted for more than 70 percent of FDI stocks in East and Southeast Asia in 2012. These FDI leaders are followed by another group, which comprises the Republic of Korea (ROK) and the ASEAN tigers, including Indonesia, Thailand and Malaysia. The third group includes Taiwan and Macao, Vietnam, the Philippines, Brunei, Myanmar, Cambodia and Laos.
In terms of FDI stocks, Hong Kong, in the past three decades, has been the most attractive FDI destination. FDI stocks have soared in Hong Kong since the late 1990s, except for the 1997-98 bump, the early 2000s and the pre-2008 boom periods, amounting to more than $1.4 trillion by 2012.
Since the late 1990s, FDI stocks in Singapore have soared as well, but not as strongly. Moreover, after the global recession, FDI stocks in the Chinese mainland have surpassed those in Singapore.
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