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Last Updated: Monday, 28 June, 2004, 14:43 GMT 15:43 UK
China tops US in investment table
Workers walk below power lines near a power plant in Beijing
China's huge domestic market now attracts more FDI than the US
China overtook the US as the biggest recipient of foreign direct investment in 2003, the Organisation of Economic Co-operation and Development has found.

China's success was part of "the biggest net flow to developing countries and emerging markets on record", the OECD said.

Overall, last year was a quiet one for foreign direct investment (FDI) activity due to a weak world economy.

FDI in OECD countries slumped 28% to $384bn (210bn) in 2003.

"The weak global economic recovery, security worries and a preference on the part of many firms to consolidate acquisitions rather than make new ones," were behind the drop in investment within the OECD, the report said.

Bonanza for emerging markets

The report found a six-fold increase of $192bn in net flows of foreign direct investment to countries outside the OECD, the report said.

The OECD includes the world's biggest economies of the US, Japan, Germany, France, the UK and Italy.

China attracted $53bn in investment from OECD countries, ahead of India with $4bn, and Russia with only $1bn.

Russia's performance was the worst since the mid-1990s, the OECD said. Furthermore, it found most investment in Russian firms went to one sector, the energy sector.

Elsewhere, foreign firms were drawn to pour money into big emerging economies - particularly China - because of the size of their growing domestic markets, the OECD said.

This contrasts with past trends, when firms looked to developing markets primarily "for lower wages and production costs".

Tough times persist

The US suffered the biggest fall in foreign investment, attracting only $40bn in 2003 compared to $72bn in 2002 and $167bn in 2001.

Investment into European countries fell 23%, with Germany and the UK worst hit.

FDI flows into Germany fell 64% to $12bn, down from $45bn in 2002.

France, however, seemed to combat the decline, pulling in $47bn, only slightly down from the $48.9bn recorded the previous year.

It is easier for foreign investors to buy French companies than to buy companies in other European countries, the report said.

FDI into the UK almost halved to $14.6bn, the OECD said.

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