EDITOR NOTE: Foreign investment in US assets dropped last year by nearly 50%! That reflects a whopping loss of confidence and capital in the world’s largest economy (for now, at least). In contrast, foreign inflows toward China increased. Simply put, China is overtaking the US as the world’s largest destination for foreign investment. How’d this happen? The world lost confidence in the US in the manner in which it unsuccessfully dealt with the pandemic. China--a socialist country that has the option of implementing draconian lockdown measures--naturally has an advantage over a nation that values freedom. Despite the lockdowns, we still enjoyed quite a significant measure of freedom, as compared with China. But as the saying goes, freedom isn’t free, and in this case, it has cost us confidence on the world stage. But all is not lost, at least on a local level. If foreign investors won’t buy up our Treasuries, forcing the Fed to print more money and pile them onto its balance sheet, we can always hedge the dollar’s decline by purchasing non-CUSIP gold and silver coins/bars. Real money can’t be debased. And there’s no real wealth that isn’t backed by real money.
China overtook the U.S. as the world’s top destination for new foreign direct investment last year, as the Covid-19 pandemic amplifies an eastward shift in the center of gravity of the global economy.
New investments by overseas businesses into the U.S., which for decades held the No. 1 spot, fell 49% in 2020, according to U.N. figures released Sunday, as the country struggled to curb the spread of the new coronavirus and economic output slumped.
China, long ranked No. 2, saw direct investments by foreign companies climb 4%, the United Nations Conference on Trade and Development said. Beijing used strict lockdowns to largely contain Covid-19 after the disease first emerged in a central Chinese city, and China’s gross domestic product grew even as most other major economies contracted last year.
The 2020 investment numbers underline China’s move toward the center of a global economy long dominated by the U.S.—a shift accelerated during the pandemic as China has cemented its position as the world’s factory floor and expanded its share of global trade.
While China attracted more new inflows last year, the total stock of foreign investment in the U.S. remains much larger, reflecting the decades it has spent as the most attractive location for foreign businesses looking to expand outside their home markets.
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