China all but disappeared from the global FDI map in February 2020 as Beijing locked down millions of people across the country, but global FDI showed surprising resilience as other countries stepped in to fill the gap. 

The fDi Index, a proxy of the sentiment of foreign investors built as a measure of the announced projects and investment signals tracked monthly by the FT’s foreign investment monitor fDi Markets, bounced back to a reading of 858.5 in February, up by 1.33% from the same period of 2019. 

China featured as the first victim of the ensuing Covid-19 pandemic in February. While the country was put into partial lockdown, foreign investment dried up. Foreign investors announced only 13 projects in China in February (negotiations were already in a very advanced phase for most of them), down from 54 a year earlier, fDi Markets figures show. 

The demise of China, traditionally one of the world’s largest recipients of greenfield FDI, indicates the kind of FDI disruption other countries in Europe and the Americas – where the Covid-19 crisis really hit in late February and early March – should expect. 

“It is important to not be lulled into a false sense of security. The relatively stable index score in February is right at the end of the tipping point. The fall in FDI into China in February is certainly a forewarning of what is already happening in other countries in March and April,”  said Glenn Barklie, head of benchmarking services at fDi Markets. 

“We are at a period of time where greenfield FDI is falling, and falling dramatically. Most countries experiencing the largest impacts of the coronavirus are seeing heavy reductions in inbound FDI. I would expect around a 50% reduction in greenfield FDI projects in March 2020 (compared to March 2019) as investors begin to halt projects ­– which will be reflected in the March index score. Most IPAs are focusing on aftercare services and job retention as new investments and expansion plans are not on company radars.”

World shows resilience 

Despite the mounting coronavirus tsunami in the Far East, foreign investors still showed appetite for deals in the West in February. Announced greenfield FDI projects remained stable at solid levels in the US, which confirmed its traditional role as the world’s largest foreign investment destination.

Some major FDI destinations in Europe such as Germany also held their ground, while others such as Poland even stood out for their FDI performance. The eastern European country managed to attract as many as 40 FDI projects in February – twice as much as a year earlier. 

Major manufacturers also continued to engage with governments across the world for their projects. US electric vehicle producer Tesla is engaging with the Brazilian government to develop a gigafactory in the state of Santa Catarina, while Canadian company Bombardier is in talks with the Egyptian government to establish a factory to produce rolling stock for local railway projects, according to investment signals picked up by fDi Markets. 

Even venture capital was still flowing in February and supporting the expansion of fintechs and other start-ups. Challenger banks Revolut and Starling Bank both closed major funding rounds in the month for, respectively, $500m and £60m to fund their European expansion, according to fDi Markets data.