1。China On The Verge Of A Worldwide Foreign Investment Boom, Says Report
From Forbes, By Eva Pereira
China’s foreign investments are predicted to soar to as much as $2 trillion worldwide within the next decade. The takeoff is already under way in the U.S., where China’s investments are more than doubling each year. In 2010, China invested more than $5 billion in the U.S. across a wide range of industries. The U.S. is poised to receive a large portion of China’s future FDI outflows as the country’s needs expand beyond the purchase of raw materials towards more upmarket, value-added investments.
There are several factors driving China’s outward investments says Daniel Rosen, co-author of the Asia Society report. “China’s going through a structural adjustment.” Its comparative advantage is shifting away from being a volume producer to a value producer. Inflation is another factor. “Chinese leaders are saying that part of their answer to the problem [of growing inflation] is to encourage firms to take liquidity outside the country.” Cash-rich Chinese firms are finding an overcrowded investment climate at home, and are increasingly investing overseas.
Former Chinese Communist Party leader Mao Zedo...
What are the Chinese looking for in their U.S. investments? “That’s the billion dollar question. Unlike other Asian economies that were looking for hi-tech investments, China is looking across the board,” says Rosen. The China State Construction Engineering Corporation has $2 billion worth of infrastructure projects under way in the U.S., including work on the ventilation system for New York City’s Second Avenue subway line. Recent Chinese FDI flows were concentrated in manufacturing, but there is growing interest in real estate, logistics, tech, financial services and infrastructure. China’s foreign investment strategy appears to be shifting towards upstream value added production–the skills and knowledge for which are concentrated in the U.S. and other developed countries.
Concerns over increased Chinese investments are overblown and stem from economic protectionism and a fundamental misunderstanding of China’s motives, says the report. For example, recently the federal government forced the huge Chinese telecom-equipment maker Huawei Technologies to unwind a $2 million purchase of a California start-up.
Like that deal, most Chinese investment deals are profit-motivated and pose no threat to national security. Half of all deals struck in 2010 were greenfield investments. By maintaining the FDI screening process already in place and addressing regulatory weaknesses, the U.S. stands to benefit from increasing FDI flows from China. At a panel discussion on the report, Lulu Wang, chief executive of Tupelo Capital Management, pointed to Japan as example of the benefits of FDI. “Japan’s entrance into the U.S. auto industry 30 years ago created competition and improved quality.”
Whether the U.S. seizes the opportunity posed by the coming surge in China’s outward investments remains to be seen. When it comes to courting foreign investors, the report suggests that federal trade-promotion offices are no match for their counterparts in other countries. The bulk of the task falls to state and municipal trade offices. Says Rosen, “We’re on a more even playing field than we were 30 years ago. We need to proactively attract investors. Political leadership is key.”
2。 China Has $2 Trillion to Invest in the USA
From Forbes,By Ray Kwong
That said, it’s too bad that global competition for those dollars, coupled with pesky political fearmongering in some circles, will mean that the U.S. won’t see as much as it needs.
China has been on a global spending spree of sorts since at least 2008, making significant purchases in Africa, Europe, Japan and Australia, as well as Canada and Latin America.
All the same, Chinese direct investment into the United States is more than doubling annually, with over $5 billion in 2010 alone. Chinese businesses have already established operations and created jobs in at least 35 of 50 states, creating more than 10,000 American jobs, according to a newly released report from the Asia Society.
“Chinese companies will be working to put $1-2 trillion of that country’s wealth to work outside its shores in the coming decade. And, if the U.S. is open to Chinese investment, it could result in hundreds of thousands of new jobs here,” said the authors of the study, economists Daniel Rosen and Thilo Hanemann.
The report warns that the United States risks missing out on a large share of the Chinese investment boom because of politics, a growing rivalry between the two nations and deep-seated perceptions that Chinese investments are unwelcome in America.
“If political interference is not tempered,” the study cautions, some of the benefits of Chinese investment — “such as job creation, consumer welfare and even contributions to U.S. infrastructure renewal — risk being diverted to our competitors.”
Surging Chinese investment has triggered populist anxieties in the United States, just as Americans once feared economic domination by Japan. “Japanese investment in the United States during the 1980s was as controversial as China’s,” the authors say, “but in the following years, U.S. affiliates of Japanese companies invested hundreds of billions of dollars in the United States, and today employ nearly 700,000 Americans.”
Clayton Dube, associate director of the USC U.S.-China Institute, notes that: “For many Americans and Chinese, Chinese FDI in the U.S. consists only of the sad CNOOC-UNOCAL dance or the successful transfer to Lenovo of IBM’s PC operation. In fact, in many communities large and small across the U.S., Chinese firms are opening up operations or acquiring businesses. Some of these enterprises are doing well — Haier’s dominance of the small dorm refrigerator market is a great example — while others are struggling.
Community leaders are anxious to woo job or sales-tax-generating investments. Even those in predominately conservative areas who might otherwise be suspicious of businesspeople from a country led by a communist party are eager to show how welcoming they can be — with some even studying Chinese, hoping to better convey their eagerness to accommodate newcomers. Both sides are eager to find ways to make money.”
3. China Invests In Foreign Talent
From Forbes, By Stan Abrams
As part of a movement to attract overseas Chinese professionals to fill jobs in various cities across China, a delegation of high-level officials from Jinan in East China’s Shandong province interviewed over 50 candidates in New York last week[.]
A separate delegation of officials from Fujian province met earlier this month with candidates in San Francisco, New York, Boston and Washington DC. In November 2009, a job fair organized by the Shanghai government in New Jersey attracted over 700 candidates, with fewer than 10 candidates being of foreign descent, organizers said. (China Daily)
As the U.S.-China economic relationship has deepened over the years, the bilateral flows of capital, equipment and intellectual property, originally quite one-sided, have begun the long shift back to balance. It seems that labor trends are not far behind.
Chinese companies have always been on the leading edge of this shift. Several years ago, outward investments made by state-owned enterprises (“SOE”s) signaled that cash-rich China would venture outside the Middle Kingdom to secure supplies of natural resources. This was followed by deals made by private enterprises like Lenovo and, more recently, Geely.
Similarly, in the China intellectual property sphere, where cross-border IP flows used to be occupied solely by foreign companies, things began to change when Chinese enterprises with valuable brands, like Tsingtao Beer, Hai’er and Bank of China, began to venture abroad and protect their trademarks. Later on, acquisitions made by Lenovo and others signaled Chinese companies were now securing famous foreign brands and technology.
Labor does not flow as easily across international borders as does capital and IP, but even so, we are seeing a change in cross-border labor practices, with the shift again coming from Chinese companies. The job fairs noted above are organized by municipalities but involve private and state-owned enterprises, solidifying a trend that began several years ago.
Ever since China opened its doors for business in 1978, there have been foreign workers in Beijing, Shanghai, Shenzhen and other large Eastern coastal cities. Since that time, however, the vast majority of business people and professionals have been employed by foreign invested enterprises, diplomatic missions, and educational institutions.
In my own industry, legal services, there were only a handful of foreign lawyers working for Chinese law firms back when I arrived in China in 1998. These days, many well established Chinese law firms in the major cities have an international department that includes a foreign-credentialed lawyer.
Over the years, China has learned valuable business lessons from foreign invested enterprises, an education that helped to first build a solid export regime, and more recently to solidify Chinese firms’ dominance over the domestic market.
The knowledge spillover from foreign experts should not be underestimated, and the success of China’s move outward to overseas markets may ultimately rest on an enterprise’s ability to utilize foreign talent, employed in China and abroad, and integrate these individuals smoothly into the Chinese hierarchy. The track record of the Japanese in this regard in the 1970s and 1980s was uneven, an example that Chinese executives have no doubt studied closely.
As Chinese companies continue to move outward and, in addition to securing natural resources and infrastructure projects, acquire distribution networks, IP, and yes, even manufacturing facilities, their ability to draw upon a pool of global talent will be closely watched.