The sharp decline in China’s FDI inflows has benefited the US

New Delhi, April 2 (IANS) The US and other select developed and emerging markets have seen a rise in FDI share as China experiences a decline, according to Kotak Institutional Equities. China lost 9.30 pps in global FDI share, while the US gained 14.3 pps over CY2019-23. Other countries like Brazil, Canada, Japan, Korea, Mexico, and Poland have also witnessed an increase in FDI inflows.
The US has witnessed a significant surge in FDI in the manufacturing sector, driven by supply chain diversification, geopolitical tensions with China, and large investments in AI. India, however, has seen a recent weakness in gross FDI inflows, reflecting a slowdown in global capital flows since CY2021 due to increasing geopolitical tensions between the US-led ‘economic’ bloc and China.
The recent weakness in capital flows has been attributed to government-funded industrial policies for strategic sectors and tightening global central bank liquidity. While sectors like electricity, electronics, and IT & communication continue to attract strong investment interest globally, India is yet to see a meaningful increase in investments despite positive reforms and incentive measures over the past five years.
Kotak Institutional Equities remains hopeful that investments in sunrise sectors in India will accelerate in the coming years. The focus should be on the domestic market while increasing presence in higher value-added goods for exports. Investments in certain sectors are expected to pick up, with the potential for growth in the future.