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US may miss out on Chinese capital
(China Daily)
Updated: 2010-09-03 17:31
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Lu Jinyong,director of the China Research Center for Foreign Direct Investment in Beijing, warns that the United States is in danger of being overly wary of Chinese investments.
As a result, he fears it could miss out on the huge amounts of capital now flowing out of China. Lu talks with China Daily reporter Fu Yu on China's outbound foreign direct investment situation.
Q: Could you give us an overview of China's foreign investment worldwide?
A: China's outbound foreign direct investment has entered into a fast-growing period with great potential. The nations' massive foreign exchange reserves, more competitive companies and the appreciation of yuan to the US dollar contributes a better situation for China's overseas investment.
China's overseas investments in the agriculture, service and high-tech industries cover more than 180 countries and regions and includes not only Asian and African countries but also leading economies such as the US and in the European Union.
Meanwhile, more and more private enterprises are taking part in overseas investments. For example, China's Geely recently completed its Volvo acquisition.
Q: Lately, 50 US lawmakers objected to plans by China's Anshan Iron and Steel Group to invest $175 million in America's steel industry. Again, though Huawei had offered the highest price for two takeover cases, fears that US regulators would block the acquisitions on security grounds short-circuited the process. Why are the Americans so skittish toward China's normal business activities in US?
A: It is understandable that each country has a national security procedure on foreign direct investments. In the US, deals would have had to be approved by the Committee of Foreign Investment in the United States, an interagency panel that reviews foreign acquisitions on national security grounds.
The amount of foreign investments into the US from China being comparatively low is not helpful to the economic recovery of the US. According to the 2008 Statistical Bulletin of China's Outward Foreign Direct Investment Report, China's investment in US ranks the ninth with $462 million, less than 1 percent of China's total overseas direct investment in 2008.
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Above all, investments usually bring benefits to ordinary people. The US may find itself cut off from the kinds of new foreign investment flows that are sorely needed to revitalize its manufacturing and infrastructure sectors.
Chinese companies are now widely viewed as pursuing a political agenda by some US critics.
In 2005, an $18.5 billion bid by the State China National Offshore Oil Corp for Unocal, a US oil and gas group, fell foul of US misgivings that Beijing was using State muscle to grab global assets.
Although Beijing calls it a "going-out" policy, deals are more likely to be about profits, prestige and skills than foreign policy goals. In any case, the West, whose banks and carmakers are underwritten by the state, is not in an ideal position to lecture others.
Q: Some Western commentators have decried China's investments in Africa as a new form of colonialism, based on the search for minerals. What's your view?
A: Such criticism is largely misplaced. Western-led development strategies, however well meaning, did not break the cycle of under-development in Africa. So Chinese investments made for sound business reasons and boosting employment and growth, offer new hope and an alternative way forward. The infrastructure the Chinese are building will also have positive effects for industries outside of natural resources.
Surely, some Chinese companies will follow local customs as long as they in the local market. They should follow closely local labor and environment laws and create a better working condition for employees and the environment.
Q: What is the future trend of China's outbound foreign direct investment, especially in the US?
A: Based on the principle of achieving mutual benefits, China's companies will strengthen its public communication with the local community to deepen the mutual understanding in terms of foreign investment.
China's overseas forays have also tended to be more modest. Chinese companies have made few outright takeover bids, preferring instead to gain experience through investing in individual projects.
In the long run, private companies will take a bigger role in overseas investment.