United States: Investing in the United States
According to UNCTAD's 2021 World Investment Report, FDI flows to the U.S. declined by 40%, from USD 261 billion in 2019 to USD 156 billion in 2020, mainly due to a reduction in reinvested earnings. The U.S. FDI stock in 2020 reached USD 10,802 billion. FDI Inflows decreased significantly in finance (-45%) and wholesale trade (-87%), while they increased in chemicals (22%). Investments by European multinationals fell by 15 % and those from Asia by 53 %. The drop in corporate profits directly impacted reinvested earnings, which fell to USD 71 billion - a 44% drop from one year earlier. Moreover, equity investments declined by a fifth, as reflected in the decline in cross-border M&A and announced greenfield investments. Cross-border M&A sales of U.S. assets to foreign investors plummeted for the fourth consecutive year (by 36%, to USD 100 billion), especially in the primary sector (by USD 18 billion to USD -2.5 billion) and manufacturing (-39%). However, the country remained the world’s largest recipient of FDI (followed closely by China), thanks to its large consumer base, a predictable and transparent justice system, a productive workforce, a highly developed infrastructure and a business environment that fosters innovation. According to data from the U.S. International Trade Administration, almost 8 million jobs in the country are directly supported by FDIs, with USD 71.4 billion of investments being directed towards R&D activities. The main investing countries in the U.S. are Japan, Canada, Germany, the United Kingdom, Ireland and France. Most of these investments are in manufacturing, financial and insurance activities, and trade and maintenance. By U.S. state, Texas received the largest investment, with expenditures of USD 18.6 billion, followed by California (USD 17.8 billion) and New Jersey (USD 14.1 billion). The latest data available from OECD shows that in the first semester of 2021 FDI inflows to the U.S. totalled USD 149 billion, tripling the level reached in the same period one year earlier (when investments stood at USD 49.4 billion).
According to the latest World Bank's Doing Business report, the United States ranks 6th out of 190 countries for the quality of its business climate, gaining two spots compared to the previous edition. The country remains the world's leading economic power, the largest international financial centre, and the third-largest country in the world in terms of population. The United States is one of the countries with the best regulatory performance in paying taxes. Starting a business is now easier (online filing of the statement of information for limited liability companies) and enforcing contracts too (electronic filing and electronic payment of court fees). On the down side, there are the increasing inequalities and the polarised political landscape, as well as a high level of household debt. Furthermore, the Foreign Investment Risk Assessment Modernization Act (FIRRMA) significantly expanded the review authority of the Foreign Investment Commission (CFIUS) on the grounds of national security, a matter that has been seen as one of the major causes of the drop in Chinese investments towards the U.S. in recent years (as many Chinese investing companies are state-owned).
Foreign Direct Investment | 2019 | 2020 | 2021 |
FDI Inward Flow (million USD) | 225,108 | 150,828 | 367,376 |
FDI Stock (million USD) | 9,362,942 | 10,813,507 | 13,619,023 |
Number of Greenfield Investments* | 2,015 | 1,641 | 1,671 |
Value of Greenfield Investments (million USD) | 101,210 | 67,161 | 85,936 |
Source: UNCTAD, Latest available data
Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.
Country Comparison For the Protection of Investors | United States | OECD | Germany |
Index of Transaction Transparency* | 7.0 | 6.5 | 5.0 |
Index of Manager’s Responsibility** | 9.0 | 5.3 | 5.0 |
Index of Shareholders’ Power*** | 9.0 | 7.3 | 5.0 |
Source: Doing Business, Latest available data
Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action.
The United States' strong points include:
Weak points for FDI in the US:
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Latest Update: January 2023