By Andrea Shalal
WASHINGTON (Reuters) – The strength of the post-COVID U.S. economic recovery and the search for safe haven investments helped boost U.S. dominance of global financial flows, while manufacturing incentives led to a surge in foreign direct investment. The White House said Friday. .
In its final report before President Joe Biden leaves office, his Council of Economic Advisers said the United States had become a magnet for foreign investment given the resilience of the American recovery. The Biden administration’s push for new investments in infrastructure, clean energy and semiconductor technology attracted global flows, especially from close allies such as Canada, Japan, South Korea and Britain.
“The importance of the United States in global capital markets continues to strengthen, reflecting our strong economy,” he said.
The report comes as Biden prepares to leave office on Jan. 20, while President-elect Donald Trump’s America First agenda and his promise to impose high tariffs unsettle many allies and threaten to curb foreign investment, experts say. of the industry.
A chapter on international capital flows in the CEA report noted that the United States received 41% of global gross capital inflows in 2022-23, the highest share of any country, and almost double its pre-pandemic share. of 23%.
This came as overall global gross receipts declined to 4.4% from 5.8% of global gross domestic product, or to $4.2 trillion from $4.5 trillion, relative to 2017-19, according to data from the International Monetary Fund. Global gross flows to and from China declined sharply during that period.
The US dollar also remained the world’s largest reserve currency and accounted for a huge proportion of global trade and cross-border financial transactions, the CEA said. The dollar’s utility remained intact despite de-dollarization fears fueled by the recent use of financial sanctions, he said, citing the depth and liquidity of the US Treasury market and the demand for Treasury securities as a safe asset. .
The dollar has risen 7.4% in nominal terms, relative to a basket of trading partner currencies, since 2022, the CEA said, citing Federal Reserve data, and the trade-weighted real value of the dollar is up 15% above its 20-year value. historical average.
The report highlighted high levels of business investment, a third of which has gone into factory construction in recent years, and highlighted rising productivity and high rates of business formation driven in part by international financing. .
While total capital inflows are below the peak of $2 trillion reached in 2007, just before the global financial crisis, portfolio investment in equity and debt markets totaled a record $1.23 trillion in 2023, he said.