China tops US as No.1 investment target

China leapfrogged the United States as the world's largest destination for foreign direct investment (FDI) in the first half of 2012, according to a report released by the United Nations Conference on Trade and Development, or UNCTAD.

China grabbed US$59.1 billion in FDI in the first six months of 2012, down slightly from last year's US$60.9 billion, and the United States received US$57.4 billion in 2012's first half, down 39 percent from a year earlier, UNCTAD said.

This is the first time that the U.S. was knocked out of the top position since 2003, the report concluded.

During 2011, the U.S. received US$227 billion in FDI while China attracted US$116 billion, according to UNCTAD.

Hong Kong took the third spot on listings with US$40.8 billion in the first half. The report said the third biggest in 2011 was Belgium, with $102 billion.

In the first half of this year, developing economies received half of all FDI flows, matching the developed world for the first time. The report attributed the shift in the balance to steep drops in the U.S. and European Union.

Global foreign direct investment inflows fell 8 percent to US$668 billion in the first half of this year compared with a year-earlier period, the report concluded.

"This reflects a protracted period of weak external demand with consequent strongly negative effects on exports and increasing uncertainty about high-growth emerging countries," the report said.

A slowdown in the volume of cross-border mergers and acquisitions also helped drive the first-half decline, the report said.

It said that "early indications show that FDI flows to the United States might be stronger in the second half of 2012."

China's Ministry of Commerce said last Friday that China's FDI slipped 3.8 percent to US83.4 billion between January and September from a year ago.

"China is experiencing structural adjustments in their FDI flows, including the relocation of labor-intensive and low-end market-oriented FDI to neighboring countries," UNCTAD said.