Significant Decline in Foreign Direct Investment in Asia in 2023

Foreign direct investment (FDI) in Asia dropped by 8% to $621 billion in 2023, driven by reduced investment in China and decreased mergers and acquisitions (M&A) sales across developing Asia, according to the United Nations Conference on Trade and Development (UNCTAD).

South Asia experienced the most severe decline, with FDI plummeting 37% to $36 billion. Significant decreases were noted in India and Kazakhstan, while West Asia saw a moderate decline. In contrast, Southeast Asia maintained stable FDI levels due to strong economic growth and global value chain linkages.

China, the world’s second-largest FDI recipient, saw a break in its decade-long growth trend, with FDI inflows declining significantly. Around two-thirds of developed economies and half of developing countries also reported drops in FDI inflows.

M&A sales in developing Asia, typically accounting for 10%-15% of FDI, fell by approximately $30 billion to $57 billion, constituting half of the total FDI decline in the region.

Despite these challenges, developing Asia remained a leader in attracting Sustainable Development Goals (SDG) investments. The region saw a 44% increase in the value and a 22% rise in the number of greenfield investment announcements, led by Southeast Asia with a 42% increase, particularly in electronics and vehicle production.

Asia continued to attract large-scale projects, with six of the world’s ten largest projects located in the region. Notable investments included $11 billion from Chinese glass and solar manufacturer Xinyi Group and a $9 billion electric vehicle battery supply chain developed by European and Indonesian companies.

However, the number of international project finance deals in developing Asia fell by 25%, except in West Asia, where deal numbers increased from 50 to 94 and values grew by 32% to $57 billion, driven by growth in Saudi Arabia, Turkey, and the United Arab Emirates.

The decline in Asian FDI contributed to a 7% drop in FDI across all developing countries, totalling $867 billion. FDI flows also decreased by 3% in Africa and 1% in Latin America and the Caribbean.