China eyeing regional investment
By Dai Yan, China Daily
Updated: 2004-02-09 10:09
More policy incentives and stronger investing power are fueling China's rise to becoming a regional investor in Asia.
At the same time, neighbouring countries also have high expectations for the added funding to benefit their economies.
The latest indication of this trend involves the establishment of delegations to study local investment environments in Pakistan, Sri Lanka and Bangladesh, according to Wang Bingxin, director of the Department of Asian Affairs under the Ministry of Commerce.
"These countries are also studying how to attract Chinese investment by setting up development zones," the official said.
The Chinese Government, which has been successful in establishing development zones for investment attraction, will this year train officials from South and West Asian countries interested in the issue, he said.
The training class was opened to officials from member countries of the Association of Southeast Asian Nations (ASEAN) last year, he added.
"The government is coming up with measures to encourage China's outward investment, especially in Asian markets," he said.
These are new moves being offered by the government, which has been calling for enterprises to invest overseas since a strategy to explore possibilities abroad was launched in 2002.
Related authorities, including the ministry and the State Administration of Foreign Exchange, are sticking to the practice of relaxing investment procedures that have taken place over the past few years.
Some Chinese enterprises, such as PetroChina, Sinopec, home-appliance maker Haier and energy giant Huaneng Group, have set up joint ventures or acquired shareholdings in many countries, including the United States, Australia, the Philippines, Malaysia and Indonesia.
Such investment is expected to strengthen their international competitiveness and create economic incentives and jobs in the receiving countries or regions.
The outward investment reached US$2.1 billion, a small number compared to its potential but a year-on-year rise of 112 per cent.
Karl P Sauvant, an economist from investment division of the United Nations Conference on Trade and Development (UNCTAD), observed "Chinese enterprises are at the threshold of becoming major foreign direct investors in Asia and beyond."
A number of factors have contributed to China's outward investment, he said, elaborating that financial strength and exposure to international business have played a part in encouraging Chinese firms to venture abroad.
"Growing competition at home also encourages Chinese firms to go abroad, adopting a diversification strategy in generating revenues and transferring matured industries to low-income countries," he said.
He believes the more China becomes integrated in the world economy and Chinese firms become subject to international competition through imports and inward investment, the more these firms will invest abroad - to acquire a portfolio of locational assets that helps them to improve their international competitiveness.
Recognizing the potential for China's outward investment, various investment promotion agencies have set up offices in China to court Chinese firms.
They include agencies from Denmark, Malaysia, Scotland, Singapore, Sweden and Thailand.
Asian countries and regions with geographical advantage and low-income levels will be hot destinations.
Statistics from the Ministry of Commerce suggest that about 60 per cent of the approved Chinese outward investment during 1979-2002 was destined to Asia. North America was the second most popular destination, followed by Africa and Latin America.
Pakistan is one of the Asian countries that wants to see a more active role played by Chinese businesses.
The amount of Chinese investment in the country was only about US$3 million last year.
When visiting China last November, Pakistani President Pervez Musharraf warmly welcomed the Chinese investors and offered many preferential conditions, such as big tax exemptions.
Chinese automobile giants, including the First Automotive Works, Dongfeng Motor Corp and Beijing Jeep, have all decided to invest about US$30 million in manufacturing or technology transfers in Pakistan.
Two private motorbike enterprises, the Zongshen Group and Lifan Group from Chongqing Municipality, also planned to set up joint ventures in Pakistan.
At this point, Chinese businesses in many sections, including leather, chemicals and textile, have shown willingness to undertake joint ventures in Asian countries.
"With raw material and labour there and the Chinese expertise and machinery, we could develop a strong industrial base," said Ma Xian, a manager from the Hua Yuan Group, a State-owned textile company.
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