Global foreign direct investment returned to growth in 2025, but the headline numbers conceal a more complicated picture. Investment is becoming increasingly concentrated in a small number of economies, projects and strategic industries, while governments are taking a more selective approach to foreign investment. For companies planning cross-border investment, geopolitical exposure, regulatory screening and long-term investment protection are becoming as important as traditional considerations such as market size, cost and tax incentives.
1. Global FDI Is Growing Again – But the Recovery Is Uneven
According to UN Trade and Development’s World Investment Report 2026, global foreign direct investment (FDI) increased by 6% in 2025 to approximately US$1.6 trillion, ending two consecutive years of decline.
However, the recovery remains uneven. FDI inflows into developed economies increased by 11%, while developing economies recorded growth of only 2%, reaching approximately US$901 billion. Much of the global increase was also driven by a relatively small number of large-scale projects, particularly investments related to artificial intelligence and digital infrastructure.
This distinction matters for businesses. A rise in global FDI does not necessarily mean that international investment conditions have become easier or that capital is becoming more geographically diversified.
On the contrary, investment is becoming increasingly concentrated.
The world’s top 20 host economies received more than 80% of global FDI in 2025, according to UNCTAD.
For companies considering new markets, country selection therefore requires a closer assessment of whether a particular jurisdiction is genuinely benefiting from current investment trends or is becoming less competitive within changing global supply chains.
2. Capital Is Moving Towards Strategic Industries
One of the clearest trends identified in the 2026 report is the rapid concentration of investment in industries regarded by governments and businesses as strategically important.
These include:
- artificial intelligence infrastructure and related technologies;
- semiconductors;
- advanced and sensitive technologies;
- critical minerals; and
- energy-transition technologies and services.
Strategic sectors accounted for approximately 44% of global greenfield investment value in 2025, compared with only 16% in 2020. The value of announced projects in these sectors increased from approximately US$109 billion to US$576 billion over the same five-year period.
This shift has important consequences for international businesses.
Investment decisions in areas such as AI, data centres, advanced manufacturing, energy, minerals and technology can no longer be assessed solely as ordinary commercial transactions. They increasingly intersect with national security, export controls, data regulation, industrial policy, sanctions and foreign investment screening.
As a result, legal and regulatory analysis is becoming relevant much earlier in the investment decision-making process.
3. Governments Still Want Foreign Investment – But They Are More Selective
The report also reveals an important change in investment policy.
Governments adopted a record 229 investment policy measures in 2025. Most remained favourable to investors: 167 measures, or approximately 73%, were classified as investor-friendly. However, governments are increasingly directing investment towards sectors that support specific industrial, technological, energy or national security objectives.
Investment incentives remain important. They accounted for approximately half of favourable measures introduced during the year, with increasing emphasis on areas such as digital infrastructure, advanced manufacturing, critical minerals and energy-transition technologies.
At the same time, investment screening continues to expand.
The number of economies operating foreign investment screening regimes increased from 21 in 2016 to 52 in 2025, particularly in sectors involving sensitive technologies, critical infrastructure, strategic assets and data.
Importantly, tighter screening does not necessarily mean that foreign investment is being rejected. UNCTAD reports that fewer than 1% of screened projects were ultimately blocked.
The broader trend is therefore not simply towards protectionism. Instead, governments increasingly appear to be asking two questions:
Do we want this investment, and does this particular investment serve our strategic interests?
4. Cross-Border Investment Risk Is Becoming More Complex
Traditional international investment analysis typically focused on market access, taxation, labour costs, corporate structure, financing and expected returns.
Those factors remain important, but they are no longer sufficient.
Companies increasingly need to assess how an investment may be affected by:
- foreign investment screening;
- national security reviews;
- trade and technology restrictions;
- export controls and sanctions;
- data localisation and cross-border data rules;
- government subsidies and industrial policies;
- supply-chain restructuring;
- geopolitical relationships between the home and host countries; and
- potential changes in government policy during the life of the investment.
UNCTAD’s outlook for 2026 remains uncertain because of geopolitical tensions, conflicts, trade policy uncertainty, high financing costs and growing economic fragmentation.
For multinational businesses, this means that a commercially attractive project may nevertheless carry significant regulatory or geopolitical exposure.
Investment due diligence should therefore examine not only the company or asset being acquired, but also the regulatory environment surrounding the transaction.
5. Investment Protection Should Be Considered Before the Investment Is Made
The changing investment environment also increases the importance of how international investments are legally structured.
UNCTAD reports that 44 international investment agreements were signed in 2025, while 56 new investor-State dispute settlement cases were initiated. Approximately 80% of those new cases were brought against developing countries. Many disputes continue to rely on older-generation investment treaties.
For investors, treaty protection should therefore not be viewed only as a dispute-resolution issue after a problem has arisen.
Before making a substantial overseas investment, companies may need to consider:
- which entity should make the investment;
- whether an applicable bilateral or multilateral investment treaty exists;
- what substantive protections the treaty provides;
- whether corporate restructuring could affect treaty protection;
- whether the investment structure satisfies nationality and ownership requirements;
- how disputes with government authorities would be resolved; and
- how treaty protection interacts with contractual dispute-resolution mechanisms.
These issues can become particularly significant in infrastructure, energy, mining, technology and other highly regulated industries where government decisions may materially affect the value of an investment.
6. What the 2026 Report Means for International Businesses
The central message of the World Investment Report 2026 is not that globalisation is reversing.
International capital is still moving, governments are still competing for investment, and significant opportunities continue to emerge.
What is changing is where investment flows, which industries attract it, and the conditions governments attach to it.
For businesses, cross-border investment strategy therefore increasingly requires three assessments to be conducted together:
commercial viability, regulatory feasibility and geopolitical resilience.
A project that appears attractive from a financial perspective may become difficult if investment approvals, data rules, export controls or changing government policies have not been considered at an early stage.
Conversely, businesses that identify regulatory trends early may find significant opportunities in sectors receiving government support and strategic investment.
The legal structure of an international investment is therefore becoming part of the investment strategy itself, rather than a documentation exercise undertaken after the commercial decision has already been made.
7. How Xeon & Partners Law Firm Can Assist
Xeon & Partners Law Firm advises Chinese and international businesses on cross-border investment and international business transactions.
Our work includes foreign investment structuring, market entry, legal due diligence, cross-border transactions, regulatory compliance, investment agreements, international commercial contracts and dispute resolution.
As international investment becomes increasingly influenced by geopolitical developments, industrial policy and regulatory intervention, businesses should assess legal and regulatory risks alongside commercial considerations before committing capital to a new jurisdiction or restructuring an existing international investment.