Total Foreign Direct Investment in the United States again broke records, reaching $3.1 trillion. In 2016, for the fourth year in a row, the United States topped A.T. Kearney’s FDI Confidence Index. And its expecting a good year for 2017. But what is making Foreign Direct Investment such a success in the USA recently? Who promotes it and who are the people who do it? European Magazine goes Stateside to find out.
FDI attraction is a highly collaborative complicated business and requires many dynamics, from business leader input, all-of-government engagement, inter-agency cooperation, and in-depth local knowledge and expertise knowledge of economic developers. The U.S. Investment Advisory Council (IAC), represents this perfectly and is a true balance of the public-private partnership of international business leaders, economic developers, and government representatives. They advise the Secretary of Commerce on the best ways to attract FDI to the United States. The Council recently made four recommendations for enhancing FDI in the United States – promote infrastructure investment opportunities; continue to work to remove barriers to FDI; harmonise federal, state, and regional FDI attraction objectives and strategies; and redouble our workforce development efforts to prepare for today’s needs.
In April 2016, the Select USA worked hard to promote their brand and achieved excellent branding through exhibiting at the Hannover Messe as official Partner Country with Germany. What was interesting for the time, the USA led their president with the largest-ever U.S. delegation to the world’s top industrial technology trade show. That to say the least grabbed everybody’s attention.
Continuing on from that in June, the third Select USA Investment Summit was held in Washington, D.C. with more than 2,500 attendees. More than 1,000 investors from 70 countries, economic development organisations from every corner of the United States, 20 federal agencies and 8 cabinet members joined the President to welcome the delegation. The 2017 Summit is upon us and continues to bring more attendees. In addition to this, the EDOs across the US and investor clients have had close coordination with Commercial Services and essentially assisted more than $23 billion in client verified investments in the United States.
Chinese companies invested a record 40 billion Euros in the US in 2016, which was an all-time record. The increase in Chinese foreign direct investment into the US ed the annual flow of corporate acquisitions to triple over 2015 levels. It also took the stock of China’s long-term investment in physical assets over $100bn for the first time, with Chinese companies now employing more than 100,000 people in the US. The increase in Chinese investment clearly shows the changing nature of the economic relationship between the US and China. For decades, US-based corporates have been building factories and making other substantial investments in China, but little direct investment has flowed the other way, although Beijing has parked trillions of dollars of its foreign exchange reserves in US Treasuries.
This huge increase in 2016 came despite rising political scrutiny of Chinese investment in Washington and a presidential campaign in which Mr Trump, the eventual winner, threatened a trade war with China and blamed Beijing for the loss of industrial jobs in key US states. However, now he is in office, as with a few other things, he may take a very different stance on this. The uncertainty surrounding the Trump administration for the moment means it is unlikely to repeat that level of investment in 2017. Slowing growth in China and an improving economy in the US would normally lead to yet more investment, however, while the economic fundamentals and the deal pipeline suggest that 2017 will be another boom year for Chinese investment in the US, there are also questions over the administrative approval process for foreign investments under the new administration.
Europe’s longstanding role as a top investor in the United States has continued and has showed continued growth. European investment is very beneficial to the U.S. economy – providing capital, high paying jobs, R&D spending, and exports. Investment is also beneficial for European firms, whose affiliate sales in the US make up a large part of their global portfolio. Increasingly, it appears that foreign direct investment and sales via affiliate companies is becoming the main mode of transatlantic business.
Since 2015, BEA data show a continued strong investment relationship with European investment partners. European FDI totalled $1.92 trillion in 2015, accounting for 61.2 percent of total foreign investment into the United States. The five European countries with the most investment in the United States by ultimate beneficial owner (UBO) are the United Kingdom, then Germany, France, Ireland and Switzerland.
Looking ahead, WIR16 expects global FDI growth to pick up in 2017 and continue to grow in 2018, possibly topping$1.8 trillion. Because of strong investment inflows in 2015, the United States was once again the world’s top destination for FDI, receiving more than twice the amount of second-ranked Hong Kong. In 2014, China and Hong Kong had eclipsed the United States as the world’s leading global investment locations, however, cumulatively, the United States remains the world’s prime location for international investment, although shrinking from competition.
Whether the United States will retain its status as the world’s most attractive investment location depends largely on future macroeconomic developments and changing financial conditions. However, the fundamentals that make the United States a great place to invest – the markets, the very business pro climate of innovation, rule of law and its people – are stronger than ever. And there are more new areas opening up than ever before. For instance, it is widely believed that investment opportunities in infrastructure could amount to more than $1 trillion. There has never been a better time to invest in the United States.
