Behind the 14% rebound in global FDI: Capital concentrates in developed economies, while the Global South faces structural marginalization.

The Real Divergence Behind the Global FDI "Rebound" Narrative

The 50th issue of the Global Investment Trends Monitor report, released by the United Nations Conference on Trade and Development (UNCTAD) on January 20, kicked off the 2026 global investment discussion with a set of seemingly optimistic preliminary data: global foreign direct investment (FDI) reached $1.6 trillion in 2025, up 14% year-on-year, ending two consecutive years of decline. However, any conclusion that simply interprets this figure as a "revival of global capital" may obscure more complex structural changes—the sources, directions, and quality of growth are redefining the development coordinates of emerging markets.

Conduit Flows Through Financial Centers Mask Weak Physical Investment

The report clearly states that more than $140 billion of the 2025 FDI growth came from conduit flows through global financial centers. These funds are often routed through specific jurisdictions for financial arrangements and do not represent actual productive investment. After excluding this portion, the real growth rate of global FDI was only about 5%, reflecting investors' lingering lack of confidence. For Global South countries that rely on physical investment to drive employment and technology spillovers, this means the gap between "paper prosperity" and "real investment" is far deeper than the surface figures suggest.

Over the past two years, macroeconomic volatility, geopolitical tensions, and policy uncertainty have continued to suppress long-term capital commitments by multinational enterprises. The surge in financial center flows is more a rearrangement of global capital within intermediary chains than a direct bet on productive assets. As capital flows increasingly rely on "pipes" rather than "factories," the traditional competitiveness of emerging markets in attracting FDI—market size, labor costs, and resource endowments—is being replaced by another logic: institutional arbitrage and asset price volatility.

A Two-Track World Between Advanced Economies and the Global South

The distribution of FDI in 2025 presents a distinct "two-track" pattern. FDI in advanced economies grew by 43% to $728 billion, with the European Union surging 56%. Large economies such as Germany, France, and Italy have regained the attention of foreign investors, with cross-border M&A and large-scale restructuring deals underpinning the rebound. At the other end, FDI in developing economies fell 2% to $877 billion. More concerning, about three-quarters of least developed countries (LDCs) experienced stagnation or decline in FDI, and international capital's focus on these fragile economies is steadily diminishing.

This divergence is not a short-term cyclical phenomenon but a manifestation of the long-term evolution of the global investment structure. Advanced economies, with their deep financial markets, advanced digital infrastructure, and stable institutional environments, are becoming the "centers of gravity" for global capital flows. At the same time, the trends of "nearshoring" and "friendshoring" in global supply chains are making multinational enterprises more inclined to locate production within political and economic alliances rather than choosing long-distance outsourcing based on traditional comparative advantages. This directly weakens the opportunities for Southeast Asia, South Asia, and parts of Africa to take on manufacturing relocation.Despite emerging economies such as India, Thailand, Malaysia, and Brazil still attracting large projects in specific sectors, overall, the Global South's share of global FDI is shrinking. UNCTAD data shows that investment growth is not only geographically concentrated but also concentrated in a few capital-intensive and technology-driven industries, further compressing the space for developing economies to participate in the division of labor in global value chains.

Data Centers and Semiconductors: A Microcosm of the New Logic of Capital Concentration

In 2025 global greenfield investment projects, data centers attracted more than one-fifth of the total value, with announced investment exceeding $270 billion, driven by strong demand for AI infrastructure and digital networks. France, the United States, and South Korea were the main host countries, while Brazil, India, Thailand, and Malaysia also successfully attracted some large projects. This was accompanied by a 35% increase in the value of semiconductor projects.

Such capital-intensive investment can certainly push up total FDI in the short term, but its "spillover effects" on host economies are very limited. Data centers typically require large amounts of electricity, land, and digital connectivity, but they create relatively few direct jobs and are not closely linked to local skills training and innovation systems. If policies focus only on "grabbing projects" while neglecting the supporting ecosystem, emerging markets may fall into a trap of "high investment, low empowerment"—assets stay local, while value creation and high-end jobs remain in the hands of transnational capital.

More notably, in industries with high tariff risks—such as textiles, electronic products, and machinery and equipment—the number of newly announced projects fell by 25%. This means that the adjustment of global supply chains is not an inclusive "rearrangement" but a selective shift toward a few policy-protected industries. For Global South countries that still rely on traditional manufacturing as their export pillar, this selective investment trend may further lock them into the low end of value chains.

Weak Infrastructure and Renewable Energy Investment: A Warning Sign for Development Finance

If data centers and semiconductors represent capital "chasing the future," then international infrastructure projects are demonstrating "risk aversion." In 2025, the scale of international infrastructure projects fell by 10%, with the renewable energy sector suffering an even sharper decline. Investors have reassessed revenue risks and regulatory uncertainties, causing multinational capital's enthusiasm for green energy projects to cool markedly. While domestically led infrastructure projects have rebounded strongly, this precisely exposes the dilemma faced by some large emerging economies that rely on international financing—when global capital contracts, can local fiscal resources fill the gap?

For many low-income countries in Africa and Asia, renewable energy and infrastructure are not only growth engines but also essential conditions for climate adaptation and energy transition. The retreat of international investment will force these countries to rely more heavily on bilateral loans and fragmented financing arrangements, further exacerbating debt risks. The UNCTAD report reminds us that without coordinated action, global investment may become even more concentrated in a few regions and industries, drifting further away from the sustainable development needs of developing economies.## Policy Implications: The Global South Needs to Proactively Reshape the Investment Contract

From the perspective of emerging markets, this trend presents not merely a "capital shortage" problem, but rather a systemic failure of the traditional FDI model. Over the past decades, the core logic for the Global South to attract foreign investment has been "exchange markets for technology, exchange costs for orders." But today, as the digital economy, artificial intelligence, and green transformation comprehensively reshape the global industrial landscape, the marginal returns of this logic are diminishing.

On the one hand, capital increasingly favors "asset-light" financial pipelines and "asset-heavy" data centers, neither of which generates sufficient local employment to drive the conversion of demographic dividends into middle-class consumption. On the other hand, geoeconomic fragmentation has made foreign investment projects increasingly subject to political and security review constraints, and the uncertainty of international investment rules forces developing economies to redesign their industrial policies and foreign investment screening mechanisms.

Although the UNCTAD report does not offer specific prescriptions, the implied policy direction is clear: countries should shift FDI policy from simple tax incentives and land provision toward establishing skills training systems, innovation systems, and local supply chain linkages that complement digital infrastructure. Only when foreign investment projects can embed themselves in the domestic economic structure and generate sustained spillover effects can the Global South avoid marginalization in the new wave of investment.

2026 Outlook: A Faint Dawn Under the Shadow of Uncertainty

Looking ahead to 2026, UNCTAD believes global FDI may grow modestly, provided that financing conditions continue to ease and cross-border M&A activity picks up. However, real physical investment activity will continue to be suppressed by geopolitical tensions, policy uncertainty, and economic fragmentation. For developing economies, this most likely means a more severe competitive environment—not only competing with developed countries for limited "high-quality" capital, but also facing homogeneous competition from other emerging markets in strategic industries such as data centers and semiconductors.

The global growth center may be shifting toward the East and the South, but international capital flows may not necessarily move in sync. The true significance of FDI lies not in bookkeeping figures, but in whether it can be transformed into sustainable productive capacity, quality employment, and inclusive social progress. In a world where capital is increasingly concentrated and risks are increasingly divergent, what the Global South needs is not simple adherence to optimistic figures, but strategic choices based on its own long-term development goals—while attracting capital, firmly grasping the autonomy of development.

This article is based on the 50th issue of the Global Investment Trends Monitor released by the United Nations Conference on Trade and Development (UNCTAD) in January 2026, and all FDI data are cited from that report.