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China has been ranked the most attractive destination for foreign direct investment, ahead of Eastern Europe and Western Europe, according to a survey of business leaders conducted by Ernst & Young. The firm's fifth annual European attractiveness survey, "An Open World", shows that the world’s regions have become much more equal in terms of where businesses want to invest.
But these investor perceptions are not yet backed up by the reality of investment flows. Although 41 percent of survey respondents ranked China as the most attractive investment destination, it still draws less than 8 percent of global foreign direct investment (FDI) inflows according to the United Nations Commission for Trade and Development (UNCTAD). While only 33 percent of respondents ranked Western Europe as their top choice investment location, the region still accounts for 37 percent of global FDI inflows according to UNCTAD.
“The world is becoming a level playing field when it comes to businesses’ perceptions of their cross-border investment options,” says Marc Lhermitte, a partner of Ernst & Young France. “The developed markets of Western Europe and the US are being challenged by competing equals. As they look ahead, businesses are chasing growth through Asian consumers’ spending power, but Europe and the US still remain vastly diversified and powerful markets.”
The number of FDI projects across Europe was up by 5 percent to 3,712 in 2007 (up from 3,531 in 2006), but FDI job creation fell by 18 percent in 2007, with a total of 176,551 jobs created (down from 214,987 in 2006). The top five countries for number of projects in 2007 remained the same, with the UK, France and Germany remaining 1st, 2nd and 3rd, respectively. The UK topped the job-creation ranking as well.
Central and Eastern Europe countries rose quickly in the survey. The Czech Republic maintained its place, despite attracting 27 percent fewer projects. It moved from fourth to third place in the job creation table despite creating 14 percent fewer jobs than last year. Russia leapt to fourth position for jobs created (+85 percent) and moved from 13th to 8th for number of projects (+60 precent). Meanwhile, Poland and Romania maintained their position in terms of number of projects. In terms of job creation, Poland fell to second, creating 41 percent fewer jobs than last year.
Russia, still an outsider FDI destination in our previous surveys, scored this year’s sharpest climb up the attractiveness ladder (up nine points, to a 21 percent rating). Russia has made notable progress in attracting investor interest over the last two years, rising from a 5 percent rating in 2006 to gain the confidence of one-fifth of our global panel.
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