Global foreign direct investment declined by 41% to $470 billion in the first six months of 2018 compared to the same period last year, United Nations trade and development agency UNCTAD said in a report, adding that the 2017 U.S. tax law was the main reason for the lowest total since 2005.
The first-half slump came after a 23% fall in 2017 as U.S. companies repatriated a net $217 billion from foreign affiliates under the new tax rules, Reuters quoted UNCTAD investment chief James Zhan as saying.
"If there's a lack of FDI for expansion of the value chains then of course it will impact on global value chains and therefore impact on global trade," Zhan reportedly said. "It's difficult to tell whether we are at a turning point [in globalization] or if this is only a slowdown."
After U.S. companies withdrew their investments in the first half of 2018, China became the preferred location for FDI with business investment flows rising by 6% to $70 billion. Britain ranked second with $66 billion worth of inflows, a reversal from 2017. The U.S. was third in the global rankings, with $46.5 billion worth of inflows.
Business flows into Europe dropped by 93%, with Ireland flipping to a negative $81 billion and a $77 billion withdrawn from Switzerland.
Money invested into newly announced startup projects, also termed Greenfield investments, edged up by 42% despite the overall slowdown. Asia attracted a record amount on the back of China's $41 billion in investments and an increase in Southeast Asian projects, according to the report.