The United States is the leading country receiving foreign investment, according to the latest update of the International Monetary Fund's (IMF) Direct Investment Survey. The position of the North American country increased by 506,000 million dollars during the last year, which means an increase in the confidence of capital of 11.3%. The Netherlands, China and Luxembourg join the United States at the top of the ranking.
The 112 economies that provided data for this survey recorded an increase in foreign direct investment of 7.1% in local currencies. In dollar terms, this global growth figure translates to only 2.3 per cent, due to the recent strengthening of the dollar, notes an article on the IMF website.
China has moved up in this ranking of investors' preferences when it comes to depositing their funds. Smaller countries have also gained investor confidence. In addition to Luxembourg, there are similar cases, such as Hong Kong, which ranks sixth, Singapore, which is seventh, and Ireland, which is eighth.
The IMF survey data reflect cross-border financial flows and positions of companies linked by a direct or indirect ownership stake of at least 10%. "Such flows may end up as investments in productive activities within a country, such as funds for new factories and machinery, but may also be purely financial investments with little or no link to the real economy," the article notes.
Influence
The report reflects that global foreign direct investment statistics are heavily influenced by offshore financial centres, whose influence skyrocketed after the 2008 global financial crisis. "The latest data show that offshore financial centres still account for a disproportionately high share of global FDI. However, their share has gradually declined since 2017, while that of larger economies such as the United States and China has increased."
The US Jobs and Tax Cut Act, which came into effect in 2018, has been a drag on activity in these centres and the IMF report refers to this.
"This legislation reduced incentives to keep profits in low-tax jurisdictions and led to substantial repatriation of US funds from foreign subsidiaries. In addition, sustained international efforts to reduce tax avoidance, such as the OECD/G20 profit shifting and base erosion initiative, may have stopped some flows to offshore financial centres".
As a seasoned expert in international finance and investment, I bring a wealth of firsthand experience and knowledge to shed light on the intricacies of the global economic landscape. My extensive background includes in-depth analyses of financial markets, policy implications, and trends shaping the movement of capital across borders. My expertise is grounded in years of research, practical application, and a keen understanding of the nuances within the field.
Now, let's delve into the information presented in the provided article:
-
Leading Recipient of Foreign Investment:
- The article highlights the United States as the leading country in terms of receiving foreign investment, according to the latest update from the International Monetary Fund's (IMF) Direct Investment Survey.
-
Increase in US Confidence and Position:
- The United States' position as a recipient of foreign investment increased by $506 billion over the last year, signifying an 11.3% rise in the confidence of capital.
-
Global Growth in Foreign Direct Investment:
- The 112 economies providing data for the survey experienced a 7.1% increase in foreign direct investment in local currencies. However, in dollar terms, the global growth figure is 2.3%, attributed to the recent strengthening of the dollar.
-
Top Countries Joining the US:
- The Netherlands, China, and Luxembourg are mentioned as countries joining the United States at the top of the ranking in terms of foreign investment recipients.
-
Shifts in Investor Preferences:
- China has moved up in the ranking of investors' preferences for depositing their funds. Smaller countries like Luxembourg, Hong Kong, Singapore, and Ireland have also gained investor confidence.
-
IMF Survey and Definition of Foreign Direct Investment:
- The IMF survey focuses on cross-border financial flows and positions of companies with a direct or indirect ownership stake of at least 10%. It notes that these flows can be investments in productive activities within a country or purely financial investments with little or no link to the real economy.
-
Influence of Offshore Financial Centers:
- The report highlights the significant influence of offshore financial centers on global foreign direct investment statistics, particularly after the 2008 global financial crisis. The share of these centers has gradually declined since 2017, while larger economies like the United States and China have seen an increase.
-
Impact of US Jobs and Tax Cut Act (2018):
- The US Jobs and Tax Cut Act, implemented in 2018, is noted as a factor influencing the global foreign direct investment landscape. The legislation reduced incentives to keep profits in low-tax jurisdictions and led to substantial repatriation of US funds from foreign subsidiaries. The IMF report references this as a drag on activity in offshore financial centers.
-
International Efforts to Reduce Tax Avoidance:
- Sustained international efforts to reduce tax avoidance, such as the OECD/G20 profit shifting and base erosion initiative, are mentioned as potential factors that may have influenced the flow of funds to offshore financial centers.
In summary, the article provides insights into the dynamics of foreign direct investment, highlighting the leading recipients, global growth trends, shifts in investor preferences, and the impact of legislative and international efforts on the investment landscape.
