Divergence in Global FDI Recovery: Developed Economies Lead, Emerging Markets Face Structural Challenges

Global FDI rebounded 14% to $1.6 trillion in 2025, a figure that appears to close the book on two consecutive years of decline, but the structural divergence behind it is more worthy of scrutiny than the surface growth. The latest UNCTAD data show that the growth was almost entirely driven by developed economies, while developing countries—especially the least developed countries—saw a further contraction in capital inflows. This "dual-track" pattern is no accident, but rather an inevitable reflection of global capital amid technology-driven shifts, geopolitical reshaping, and supply chain restructuring.

The "Dual-Track" Narrative of Capital Flows

In 2025, FDI inflows to developed economies jumped 43% to $728 billion, with the EU growing 56% and major economies such as Germany, France, and Italy experiencing large-scale cross-border M&A. At the same time, developing economies as a whole fell 2% to $877 billion, and three-quarters of the least developed countries faced stagnation or decline. More notably, more than $140 billion of the global FDI increase came from transit flows through global financial centers; excluding this portion, real investment activity grew by only about 5%. This suggests that the gap between the "digital prosperity" of global capital flows and real-economy investment is widening.

For emerging markets, this divergence is not caused by a single factor. On the one hand, the global interest rate environment, geopolitical tensions, and policy uncertainty are pushing multinational enterprises toward more certain investment destinations. On the other hand, the explosive growth of capital-intensive industries—such as data centers—is reshaping the sectoral distribution of FDI, precisely in areas that many developing economies find difficult to reach.

Structural Challenges for Emerging Markets

Despite overall pressure, emerging markets are not without bright spots. UNCTAD data show that data center projects attracted more than $270 billion in announced investment in 2025, accounting for more than one-fifth of global greenfield project value. Emerging economies such as Brazil, India, Thailand, and Malaysia also secured large data center projects. However, investment is highly concentrated in a few strategic industries, and these projects typically require huge capital, advanced technology, and stable electricity supply, with limited effects on local employment and industrial spillovers.

At the same time, international cooperation projects in infrastructure fell 10%, and investment in renewable energy declined significantly, leaving developing countries that rely on international financing for large-scale infrastructure facing even bigger gaps. In fact, domestically led infrastructure projects have rebounded in some countries, but this may widen the investment divide for those countries that do not have their own domestic capital reserves.

From "Investment Volume" to "Investment Quality"The "high-quality" transformation of global FDI is accelerating. The value of semiconductor projects has grown by 35%, while the number of projects in tariff-sensitive, value-chain-intensive industries such as textiles, electronics, and machinery has plummeted by 25%. This means that global supply chains are shifting from traditional low-cost manufacturing toward more technology-intensive, capital-intensive segments. For emerging markets, this is both a challenge and an opportunity: if they cannot improve their local technology absorption capacity and digital infrastructure, they risk being locked into the lower end of the value chain; conversely, if they can plug into the data economy—for example, by leveraging data center construction to drive local skills training, grid upgrades, and the development of a cloud computing ecosystem—they stand a chance to participate in a new round of global digital economy expansion.

At the policy level, international organizations and national governments are facing a key question: how to shift FDI from a "flag-planting" approach to "root-taking" development. The UNCTAD report also points out that digital infrastructure investment must be more closely linked to skills development, innovation systems, and local value creation in order to generate broader growth effects.

Strategic Choices for the Global South

Against the backdrop of a reshuffling global investment landscape, developing countries need to design investment policies more prudently. First, they should prioritize improving governance transparency and investment facilitation to hedge against the siphoning effect of advanced economies. Second, they can explore targeted industrial policies, using emerging fields such as data centers and renewable energy as leverage to promote the extension of domestic industrial chains. Third, regional cooperation—such as through South-South investment agreements and joint infrastructure funds—can help reduce single-market risks and enhance collective bargaining power.

The outlook for global FDI in 2026 remains highly uncertain. A possible easing of financial conditions may bring modest growth, but geopolitical tensions and the risk of economic fragmentation still loom. More concerning is that investment activity may become further concentrated in a few regions and industries, exacerbating the risk of marginalizing the Global South. For emerging markets, the present moment calls not for waiting for capital to return, but for proactively adjusting their own position in the new narrative of globalization.