US Gets Biggest Slump in Foreign Investments

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Last updated at: (Beijing Time) Saturday, July 06, 2002

US Gets Biggest Slump in Foreign Investments

The United States had the biggest decline in received foreign direct investment last year compared to other developed countries, The Wall Street Journal reported on Friday.

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The United States had the biggest decline in received foreign direct investment last year compared to other developed countries, The Wall Street Journal reported on Friday.

Foreign direct investment entering the US last year tumbled more than 57 percent, from 308 billion dollars in 2000 to 131 billion dollars, the lowest level since 1997. It was also the biggest annual decrease among the 30 developed countries belongingto the Organization for Economic Cooperation and Development (OECD), the journal said citing OECD-released figures.

Last year, developed countries saw a general slide of direct investment from abroad. In total, foreign direct investment flows to developed countries sharply reduced by 56 percent, to 565 billion dollars from more than one trillion dollars, said the report. The report said "the steep declines in foreign direct investment are another example of how the fizzling stock market is feeding through to the real economy."

The report mainly attributed the boom of direct investment in the late 1990s and 2000 to the situation in which companies used the soaring value of their shares during that period to finance mergers and acquisitions across national borders. "With stock prices lower, the merger market has dried up and it is weighing oncross-border investment," said the report.

Direct investment into the US continued to fall in the first quarter of this year to an annualized 103 billion dollars, said the report, predicting that the investment could further drop to its lowest level since 1996.

Analysts say the declining direct investment might suggest morebroad economic implications of the bearish stock market this year.

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