China’s global foreign direct investment might have dropped to an all-time low in 2014, but the nation still reigns supreme as the top choice for FDI, according to a report by the United Nations Conference on Trade and Development.
In the survey conducted by the organization, 28 percent of respondents chose China as their first choice for foreign direct investment.
China's outbound direct investment, on the other hand, is expected to experience fast growth in the coming years. UNCTAD's World Investment Report 2015 cited outbound direct investment as a "significant driving force of China's industrial upgrading and economic development."
The report stated that the strong balance sheets of local enterprises allow China's capital markets to have a steady source of funds and help keep the yuan's exchange rate stable.
Although interest in manufacturing has shown a steady decline in recent years, foreign direct investment in the service sector increased. The FDI China received in 2014 amounted to a whopping $129 billion, a 4-percent year-on-year increase. As a result, the country replaced the United States as the world's largest FDI recipient for the first time.
Meanwhile, China's ODI is the world's third largest after the U.S. and Hong Kong. The Chinese mainland received $116 billion in outbound direct investment last year, which shows a 15-percent increase.
For Director Zhao Xiaoning of the UNCTAD's Division of Investment and Enterprise, the shift in international investment patterns paves the way for China to play a more significant role in global investment.
However, global FDI suffered a 16-percent loss to $1.23 trillion last year as a result of elevated geopolitical risks, fragility of the global economy, and most of all, investors' uncertainty. The UNCTAD, through the report, suggested that in order to fix global FDI performance, reform must be made in the international investment agreement regime.
"Policymakers should reform the system to promote sustainable development and bring coherence to the almost 3,300 agreements currently in existence."
UNCTAD secretary-general Mukhisa Kituyi added: "Reform should be guided by the goal of more effectively harnessing international investment agreements for sustainable and inclusive development."