Inside fDi: India cottons on to FDI while China takes the silk road

According to The fDi Report 2016, our soon-to-be released annual report recapping the global greenfield investment trends of the previous year, greenfield FDI is continuing its recovery phase. But it is a sketchy recovery and not an entirely convincing one. The report reveals capital investment increased by 9% in 2015, to $713bn, while the number of jobs created through FDI grew by 1% to 1.89 million. But the number of projects declined 7%, to 11,930.

The report highlights a number of key trends from the past year, which we’ll be delving into in future issues of this magazine, but the big FDI story of the past year is undeniably India.

After a long period of trailing behind China, India is now racing past its rival. India was the highest ranked country by capital investment in 2015, with $63bn-worth of FDI projects announced. All this while China saw a 23% decline in capital investment and a 16% drop in FDI projects. India replaced China as the top destination for FDI by capital investment following a year of high-value project announcements. Maintaining India’s current momentum – which has seen rampant GDP growth rates as well as the uptick in FDI – is the monumental task faced by the country's government. Longer term challenges must also be faced head on, including improving India’s infrastructure, reducing bureaucracy and tackling inequality; how well these are addressed will have a significant effect on the future continued competitiveness of India as an investment destination and as a top-tier economy.

China has different concerns. Faced with plateauing growth and rising costs, the country is going through a transition to becoming a high-income country while at the same time solidifying its place as a world power. As befits its new status as a global goliath, China is looking outward to solve some of its problems – such as excess capacity due to slowing demand – and this will not be without consequence to the rest of the world. Already the alleged ‘dumping’ of Chinese steel has distorted the global steel market and countries such as the UK – where major investor Tata plans to sell off its steel business, a situation many have blamed on the flooding of cheap Chinese steel into Europe – are feeling the effects in a painful way.

But there can also be positive impacts of China’s new phase: its highly ambitious initiative to revitalise the old trade route of the Silk Road and create bold new logistics corridors stretching from China to Europe has the potential to generate investment and boost connectivity in many parts of Eurasia that sorely need both. Our cover story explores the implications and opportunities the plan presents.

For more on all the other top FDI trends of 2015, and a breakdown of regional and country-level performance, you can download The fDi Report 2016 from www.fDiIntelligence.com. 

Courtney Fingar is the editor-in-chief of fDi Magazine.