According to the report, China is projected to overtake the US as the leading recipient of corporate investment in the next five years. Japan, Singapore and the United Arab Emirates are also expected to lose ground, while Brazil, Russia and India, like China, are expected to gain ground. The report says India is likely to see the greatest growth in terms of its share of foreign investment overall and should become the world leader for investment in manufacturing. Survey results also indicate Europe will keep its attraction for investors, with the UK maintaining a very strong position, especially in financial services.
KPMG says 24% of respondents have plans to make significant investments in China five years from now, up from 17% this year. Russia can expect investments from 19% of respondents in five years, up from 12% this year, and Brazil can expect investments from 14% of respondents, up from 10%. India's share of investments is estimated to see the largest percentage increase in investments at 8%, driven mainly by a major boost in manufacturing. Some 18% of responding companies, including a full quarter of manufacturers, expressed intentions to invest in India, two thirds of them for the first time.
By contrast, the US share of investments is expected to fall by 4% in five years. However, this still represents 23% of respondents. The US is expected to relinquish its dominance of the mining, industrial products and IT/telecom sectors, with China taking first place in each case. According to the survey, the UK will likely remain the most popular developed economy outside the US. In financial services, a traditionally strong sector for the UK, the country is expected to move from second place to a tie with the US for first place in regard to global investment. Spain and Italy can both expect an increase in foreign investment, and Germany can expect to maintain its current share.
"The continued strength of the European economies may come as a surprise to some, but the fact that they hold up so well suggests that we may be developing a roughly equal balance of economic power between the Americas, Europe and Asia-Pacific," said KPMG partner Sue Bonney, head of tax for the firm's EMEA region, speaking at KPMG's 2008 EMEA Tax Summit in Barcelona, where the survey was launched. "That would indeed herald the start of an entirely new global economic game."
In Bonney's view, the survey shows that corporate investors are already planning their responses to a shift in global economic power. "They help confirm the rise of the Brazil, Russia, India and China [BRIC] economies as viable alternative places to invest, taking funds primarily from the US economy," she said.
At the same time, she added, the majority of survey respondents appear to view the next five years as a return to more normal patterns of investment, following a period when the US has had a disproportionately high share of global investment funds. "But a return to the market conditions of, say, 2003 does not explain the shift in influence that these strategists expect towards the BRIC economies," she said. "This does look like the beginnings of a fundamental change in the balance of economic power."
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