China's steady economic recovery from the impact of COVID-19 has effectively stabilized global investment and cushioned Asia from the hit of the pandemic, experts said.
However, going forward more efforts will be needed to energize domestic manufacturing investment and consumption and stabilize trade.
A report released in June by the United Nations Conference on Trade and Development showed that global flows of foreign direct investment had suffered a heavy blow from the pandemic.
Global FDI flows fell by 35 percent in 2020, to $1 trillion from $1.5 trillion the previous year, the report said. In particular, FDI to developed economies slumped by 58 percent year-on-year, mainly due to pandemic-induced investment obstructions. Lockdowns slowed down existing investment projects, while the prospect of a recession led multinational enterprises to reassess new projects, the report said.
According to the UN trade and development body, Asia was the only region that registered positive FDI growth, with China the largest overseas investor and the second-largest recipient of global investment in 2020.
"China's quick recovery from the pandemic has made the country a popular destination for overseas capital, while the government's arduous efforts last year in removing foreign investment barriers, enabling an investment climate and expanding market access for foreign investors, have added to China's attractiveness for investors worldwide," said Bai Ming, deputy director of the Ministry of Commerce's International Market Research Institute.
In the long term, a global decline in FDI will hamper optimal allocation of resources and production factors, he added.
The signing of the Regional Comprehensive Economic Partnership agreement has cemented the region's stability and attractiveness as a well-connected, important global supply chain, Bai said.
The UN trade report indicated that capital flow into Asia remained steady. FDI flows to countries in Asia increased by 4 percent in 2020, reflecting the region's resilience amid the global contraction in FDI.
"Despite the pandemic, FDI to and from the region remained resilient in 2020. A developing Asia is the only region recording FDI growth, accounting for more than half of global inward and outward FDI flows," James Zhan, UNCTAD's director of investment and enterprise, said in a statement.
The prospects for FDI in Asia this year are more favorable than the global average, due to the recovery in trade, manufacturing activity and a strong GDP growth forecast, Zhan said.
Tu Xinquan, dean of the China Institute for WTO Studies at the University of International Business and Economics, said China's effective pandemic control made its comparative advantage in the manufacturing sector more prominent last year. He said with developed economies likely to rev up in the second half of the year, demand will climb and China's foreign trade will keep growing. Its attractiveness as a destination for overseas capital will continue, Tu added.
Domestically, policy measures are needed to energize domestic manufacturing and boost consumption to make growth more stable and balanced, some economists believe.
Zhong Zhengsheng, chief economist with Pingan Securities, said in a statement on Saturday that in the first six months of this year, economic recovery was mainly driven by services and investment in real estate, infrastructure and manufacturing. Consumption was one of the relative "weak links" in the recovery.
He said that total social financing as well as M2, a broad measure of money supply that covers cash in circulation and all deposits, are likely to grow steadily.