Final Test

Directions: For the mid-term test, you are allowed 180 minutes to study the case and
answer the questions followed. You should write at least 350 words for each question.

Foreign direct investment happens when an individual or business owns 10% or more of a
foreign company. If an investor owns less than 10%, the International Monetary Fund (IMF)
defines it as part of their stock portfolio.
A 10% ownership doesn't give the individual investor a controlling interest in the foreign
company. However, it does allow influence over the company's management, operations, and
policies. For this reason, governments track investments in their country's businesses.
Trends and global patterns
Global FDI flows rose modestly in 2019, following sizable declines registered in 2017 and 2018.
At US$1.54 trillion, inflows were 3 per cent higher than in 2018, but remained below their level
of 2017.
In 2019, seven of the top 20 host economies were developing economies. The largest
recipient of FDI was the United States of America, followed by China and Singapore. The
world’s largest foreign direct investors were Japan, the United States of America and the
Netherlands.
Many economies of Eastern Europe, the Caucasus region, Latin America and the Caribbean,
Western, Middle and Eastern Africa, South-Eastern Asia and Oceania recorded FDI inflows
exceeding 2 per cent of their GDP. Rates below 1 per cent were mainly found in Eastern Asia
and in oil-exporting economies in Southern America, Africa and Western Asia.

In 2019, FDI inflows to developing economies amounted to US$685 billion, almost twice their
FDI outflows (US$373 billion). Sixty-nine per cent of these inflows and 87 per cent of the
outflows were attributed to developing economies in Asia and Oceania. Developing
economies in America and Africa attracted less FDI and played only a marginal role as foreign
direct investors. Developed economies generated slightly more FDI than they received.
Transition economies were net FDI recipients.

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Origins and destinations of foreign direct investment
Outward FDI flows from developed economies rose significantly from the previous year, from
US$534 billion to US$917 billion in 2019. This increase was mainly due to a resurgence of
outflows from Northern America. After a year with slightly negative FDI from that region in
2018, in 2019 Northern American outwards FDI reached 15 per cent of global FDI. The
developed economies in Asia and Oceania had a comparable share (18 per cent). The share
of developed economies in Europe was double (36 per cent).
On the recipient side, Asia and Oceania remained the main host region of FDI in the
developing world, attracting 31 per cent of world FDI. American and African developing
economies received, respectively, 11 and 3 per cent.

In 2020, both the number of FDI projects and capital investment in FDI plummeted by a third
from 2019’s levels. fDi Markets recorded 11,223 FDI projects compared to the 16,816
recorded in 2019. They mobilised a total of $528.2bn, down by 34% from the previous year,
while the number of jobs created fell by 40% to 1.36 million in the period.
The US has retained its spot as the top destination country, attracting $61bn of FDI. China,
which ranked second in 2019, dropped into third position in 2020 attracting 40% less capital
investment. Asia-Pacific was the top destination region for FDI by capital investment with
$162.2bn-worth of FDI recorded despite a 37% decline in 2020 from the previous year.
Western Europe attracted the highest number of FDI projects with 3882 announcements
recorded. Western Europe was the leading source region for FDI in 2020, accounting for 49%
of FDI projects globally and $221.5bn in capital investment.

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Key trends in 2020 include:
• For the first time since fDi Markets began recording, renewable energy replaced coal, oil &
gas as the top sector by capital investment, accounting for $87.2bn in 2020.
• The communications sector attracted capital investment for $56bn, up by 41% from a year
earlier.
• The UK was the top destination country for FDI in Europe in 2020, with a total of 868 projects,
while California remained the top destination state for North American FDI projects in 2020,
but Texas overtook New York for second place.
• Despite the decrease in FDI into Asia-Pacific, project numbers in New Zealand increased by
to 54, up by 32% from 2019, and outward investment increased by 3% in the period.

China was the largest recipient of foreign direct investment in 2020 as the coronavirus
outbreak spread across the world during the course of the year, with the Chinese economy
having brought in $163 billion in inflows.
The world's second-largest economy has surprised many with the speed of its recovery from
the coronavirus jolt, especially as policymakers have also had to navigate tense U.S.-China
relations on trade and other fronts.

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Questions:

1.There will be investment, but where? According to the data provided, please analyze the
world’s FDI trends in the post-pandemic era. (The trends might be analyzed along regions,
industries, timelines and so on)
2. One of the concerns about FDI is around the outflow countries influence of recipient
countries. Some think that FDI could be used as a tool for culture exportation; some raised
the question to a level of idealism. What is your opinion on this issue?
3.Take China as an example, compare the pros and cons of FDI for a given region or country.