Global FDI returns to growth, while the Global South faces a new round of capital divergence.

Behind Capital's "Warming Up": The Global South Faces New Structural Divergence

In 2025, global foreign direct investment (FDI) rebounded to $1.6 trillion, a year-on-year increase of 14%, ending two consecutive years of decline. On the surface, this is a sign of a warming international investment cycle; but the latest report released by the United Nations Conference on Trade and Development (UNCTAD) reminds us that the real recovery is far more complex than aggregate data suggest. More than $140 billion of the growth came from transit flows through global financial centers; after excluding these "pipeline funds", global FDI grew by only 5% year-on-year. This means that the expansion of real productive investment remains weak. More noteworthy is that the reconfiguration of international capital across regions and industries is pushing the Global South into a more uncertain position.

Developed Economies Attract Capital Again, Capital Inflows to Developing Regions Turn Negative

From a regional perspective, the most prominent change in FDI flows in 2025 was that developed economies once again became the core of capital concentration. FDI inflows to developed economies jumped to $728 billion for the full year, an increase of as much as 43%; EU inflows grew by 56%, with active cross-border M&A in large economies such as Germany, France, and Italy as the main support.

At the same time, FDI inflows to developing countries as a whole actually fell by 2%, to $877 billion. The situation of the least developed countries is particularly difficult, with about three-quarters of them experiencing stagnant or negative capital inflows. This divergence confirms a problem that UN trade and development institutions have long warned about: the global investment system does not naturally serve development needs. When capital is driven by monetary policy and geopolitical logic, low-income countries are often the first to be squeezed out.

The Data Center and Semiconductor Boom: Whose Window, Whose Threshold?

The industrial structure of global FDI also underwent significant changes in 2025. According to the data, announced investment in data centers exceeded $270 billion, accounting for more than one-fifth of the total value of global greenfield projects, making it the largest single investment category. The expansion of AI infrastructure and demand for digital networks are the core drivers. Among host countries, France, the United States, and South Korea led the way; at the same time, emerging markets such as Brazil, India, Thailand, and Malaysia also attracted some large projects, indicating that digital infrastructure investment is extending to certain qualified nodes in the Global South. Announced investment in semiconductor projects rose 35% year-on-year, further strengthening the dominance of technology-intensive capital.But this industrial boom is not universally beneficial for developing countries. Projects in sectors with high technological and capital thresholds tend to be attached to existing power grids, communication networks, and supply chain networks, with limited linkages to the host country's local industries. In contrast, in industries heavily affected by tariffs and dependent on global value chains—such as textiles, electronics, and machinery manufacturing—the number of new projects has plummeted by 25%. In other words, capital is strategically withdrawing from traditional manufacturing that can absorb large amounts of employment, while converging on a small number of capital- and energy-intensive digital facilities. For the Global South, this is both a window for hosting data center investment and a potential threshold for entering higher value-added industries.

International investment in renewable energy declines, and the infrastructure gap widens once again

Data from the United Nations Conference on Trade and Development also show that international infrastructure project investment fell by 10% in 2025, with the renewable energy sector notably weak. Investors have become more sensitive to revenue risks, regulatory changes, and uncertainties in long-term contracts, prompting some multinational capital to exit. Although infrastructure projects led by domestic investors have rebounded somewhat, this "internal circulation" cannot fill the gap faced by developing economies that rely on international financing. Against the backdrop of an urgent need to advance the global energy transition, the retreat of international renewable energy investment may leave the least developed countries without reliable clean electricity for years to come, further constraining their industrialization and digitalization potential.

2026: Uncertainty remains the dominant theme, and institutional resilience matters more than attraction policies

Looking ahead to 2026, the report projects that global FDI may grow moderately, provided that financing conditions continue to improve and demand for cross-border mergers and acquisitions recovers. However, geopolitical tensions, policy uncertainty, and global economic fragmentation will continue to suppress actual investment activity. Without multilateral coordination, the trend toward concentration of international capital could intensify further, evolving into a closed capital loop among a handful of industries and countries.

For emerging economies in Asia, Africa, and Latin America, the real challenge lies not in chasing impressive foreign investment statistics, but in whether they can convert mobile capital into sustainable development capacity through stable policy expectations, infrastructure, and local supporting industries. What the Global South needs to engage in is no longer merely "passively receiving capital," but actively shaping rules and determining the way capital is embedded in local growth. This will be a protracted institutional competition and a key variable in determining the scope of the next phase of global growth center diffusion.