Charted: Foreign Direct Investment in Emerging Markets
Key Takeaways
- Foreign direct investment in Emerging Markets has a compound annual growth rate (CAGR) of 8.6% between 2002 and 2022.
- World foreign investment grew a CAGR of 4.4% during the same period.
- In 2022, foreign nations invested nearly $430 billion into Emerging Markets.
Between 2002 and 2022, foreign direct investment in Emerging Markets (EMs) grew at a CAGR of 8.6%, compared to the 4.4% CAGR for total global FDI.
Developing nations have benefited heavily, with the GDP of many booming over the same period.
In this graphic, the second in the EM Series, Visual Capitalist has partnered with Global X ETFs to explore foreign investment in developing markets over the past two decades using data from the World Bank.
Cross-Border Growth
Foreign Direct Investment (FDI) is a mechanism whereby an investor in one country establishes a lasting interest, with a decent level of control, in a project or business in another country.
Consequently, investment in these markets remains high. Below is a table that breaks down EMs (excluding China) FDI compared to the world total FDI.
| Year | EM (ex. China) Total | World Total |
|---|---|---|
| 2002 | $82.36B | $752B |
| 2003 | $73.79B | $737B |
| 2004 | $127.10B | $1,010B |
| 2005 | $195.29B | $1,550B |
| 2006 | $215.83B | $2,190B |
| 2007 | $338.80B | $3,110B |
| 2008 | $356.08B | $2,440B |
| 2009 | $189.50B | $1,410B |
| 2010 | $268.51B | $1,900B |
| 2011 | $331.20B | $2,360B |
| 2012 | $319.60B | $2,050B |
| 2013 | $315.69B | $2,170B |
| 2014 | $334.58B | $1,930B |
| 2015 | $284.87B | $2,760B |
| 2016 | $389.62B | $2,740B |
| 2017 | $282.53B | $2,200B |
| 2018 | $260.40B | $895B |
| 2019 | $414.27B | $1,850B |
| 2020 | $422.05B | $1,230B |
| 2021 | $436.46B | $2,290B |
| 2022 | $428.86B | $1,790B |
| CAGR | 8.60% | 4.43% |
EMs often attract high levels of FDI due to the growth potential of these nations, projects, or enterprises. However, it also allows investors to focus on more minor or overlooked markets.
Foreign Direct Investment in Developing Markets
Developing Markets have enjoyed a strong current of FDI in recent years, allowing the GDP of many developing nations to boom and creating opportunities in untapped markets for discerning investors.
Exploring Emerging Markets (ex. China)
The Global X Emerging Markets ex-China ETF (EMM) seeks to invest in companies, excluding those in China, that can achieve or maintain a dominant position within their respective markets.
The fund’s strategy aims to identify early winners in booming industries, where the entrepreneurship and grit held within these markets can produce long-term global competitors.