Where All the Foreign Direct Investment Flow

(January 2023) In 2021 the US has become the world’s top destination for foreign direct investment (FDI) with $5 trillion of accumulated inward FDI, while China has moved up to the third position. 

• According to the IMF's Coordinated Direct Investment Survey the US inward FDI position increased by record high of $506 billion in 2021. China's inward FDI position for the same year increased by $364 billion and amounted to $3.6 trillion.
• Smaller economies that represent financial offshore centers take prominent positions among the global top 10. The Netherlands, Luxembourg, Hong Kong SAR, Singapore, Ireland, and Switzerland are listed among top 10 FDI destinations even though none of these economies rank among the top 10 when it comes to gross domestic product.
• To obtain tax or regulatory benefits many multinational companies set up special purpose entities in offshore financial centers, which boosts FDI statistics but has very limited impact on hosting economy.
• The latest data from the MF's Coordinated Direct Investment Survey shows that the share of offshore financial centers in accumulation of inward FDI has gradually declined since 2017 which IMF economists explain by several policy initiatives. The US Tax Cuts and Jobs Act as well as OECD/G20 Base Erosion and Profit Shifting initiative could reduce incentives to keep profits in low-tax jurisdictions and led to a substantial US repatriation of funds from foreign subsidiaries.