To Foreign Direct Investors, China Looks Better Than U.S.

ByJohn S. McClenahen In a declining foreign direct investment (FDI) climate, China has overtaken the U.S. as most-attractive destination, suggests the latest annual Foreign Direct Investment Confidence Index -- surveying senior executives of the world's largest 1,000 companies -- by management consultancy A.T. Kearney, Plano, Texas. And for the first time, a majority of global investment decision-makers eschew mergers and acquisitions (M&A's) as mode of entry. Only 40% preferred M&A's in 2002, versus 60% in 2001 and 71% in 2000. FDI includes investment in joint ventures, significant stock ownership and/or physical assets -- like plants and equipment -- in a foreign country. 2002's index shows the first broad investor-sentiment decline in five years, says A.T. Kearney. But China -- eliciting increased economic optimism among investors -- bucked the trend, its FDI Confidence Index reaching 1.99 versus last year's second-place 1.69. The U.S. -- besmirched by slow economic recovery, roller-coaster stock market and corporate scandals -- dropped to 1.89 from 2.03. Regionally, Europe dominated, with five nations in the Index's Top 10.