Foreign investment in Germany and France plunges

In France, inward investment almost halved from $43bn (€35.44bn) to $24bn, according to figures released yesterday by the Organisation for Economic Cooperation and Development, the group representing the world’s most industrialised countries.

In Germany, foreign investors actually withdrew $39bn, having invested $27bn in 2003.

Mark Zandi, chief strategist at Economy.com, the consultants group, said the data showed US companies the main source of direct investment funds in 2004 were spending their cash piles mainly on Asian investments.

"US companies are attracted to Asia partly because the currencies remain competitive, but also as low cost bases for production destination and as growing markets in their own right," he said.

"Europe is almost a mirror image of this, with a more expensive currency, weak domestic demand, high labour costs and, now, political uncertainty."

But the weakness of continental Europe did not affect the UK. Foreign direct inflows into the UK more than trebled to $78.5bn.

The UK is among the world's most active countries for direct investment, and is both a large recipient of investment and a big investor overseas.

US companies almost doubled their overseas spending in 2004, with foreign direct investment outflows jumping to $252bn from $141bn in the previous year.

Wealthy countries overall stepped up investment in developing economies, with overall OECD outflows climbing from $593bn to $668bn in 2004.

China was the largest recipient of direct investment in developing countries, with a record inflow of $55bn up from $47bn in 2003.

By Christopher Swann in Washington Published: June 23 2005 23:49

Source: Financial Times http://news.ft.com/cms/s/3d3c1b6a-e437-11d9-a754-00000e2511c8.html