Foreign Investment in China Presentation Outline General Background Who are investors When, Where and How

New Market Since 1978, Deng Xiaoping’s open-door policy, many foreign businessman pushed their way to China Industries-- infrastructure projects (railway roads), steel industry, telecommunications, and technology

Total (Realized) FDI in China YearFDI ($ billion)

Foreign Money Flows to China ($ million) Country HK13,208125,300 US 2,382 17,963 Taiwan ,458 Japan 1,740 18,890 Singapore ,626 UK 862 5,830

Overseas Chinese Investors Hong Kong and Macao Taiwan 55 million ethnic Chinese living outside mainland China (21 from Taiwan and 6 million from Hong Kong) –Four tigers --HK, Taiwan, Singapore, Korea (only Korea is Not Chinese) –Thailand, Indonesia, Malaysia

Taiwan FDI in China US$ bn Source: Taiwan’s Ministry of Economic Affairs

US Investors Many big and small-to-medium sized firms have invested in China For Example-- Boeing, Monsanto, GM Walt Disney- – joint venture with Post and Telecommunications Press –Chinese-speaking Mickey Mouse and Donald Duck in 1987 but pulled out in 1993

US Investment in China $bn 18% 17% 7%1%5% 7% 8% of total

U.S. FDI In China $billion % of China’GDP

Japanese Investors First investment, 1979 Investment picked up in 1990s, including –textiles, –electrical applications, –food and chemicals, –supermarket operators (Yaohan and Daiei), –trading firms, –agriculture, –transportation, energy and communications

Japanese (continued) held-back technology A careful long-term investment strategy For example, Dalian –Initial investment in trading company to build structure –follows by financial firms

South Korea Late 1970s, first unofficial contact 1991 signed agreement on Most Favored Nation (MFN) status Initial investment in Yellow Sea Economic Zone (including Shandong and Liaodong peninsulas) Later extended to the South China is Korea’s 4th largest trading partner

European Investors Britain, France, Germany and Italy are ranked by Chinese top 10 investors Britain heavy investment in China –In 11/1997, joint venture of P&O (UK’s transport and property company and Shougang Group (China’s conglomerate with steel and machineary) –one of the world’s largest bulk shipping operations of dry bulk carriers

Germany low profile but one of the largest investment in automobile industry (e.g. Volkswagen and Daimler-Benz) other industries: satellite technology, solar collectors, electronics, telecommunications, power plant and others

Provinces Coastal Areas Guangdong Jiangsu Fujian Shanghai Beijing Others Inland Areas FlowsShare (%) FDI Distribution in China

1998 survey by 96 European companies express problems in China (FT- 2/16/98): –counterfeits of their products –competition from imports (esp. Hong Kong) –Retaining staff Royalty bonus career development, housing allowance, housing loans –Preference for wholly-owned subsidiary vs joint venture