Foreign Investment in China

1
Foreign Investment in China

• Presentation Outline
• General Background
• Who are investors
• When, Where and How

2
New Market

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

3
Total (Realized) FDI in China

• Year FDI ( billion)
• 1984 1.419
• 1986 1.875
• 1988 3.194
• 1990 3.487
• 1992 11.008
• 1994 33.767
• 1996 41.726
• 1997 45.257
• 1998 45.463
• 1999 40.398
• 2000 40.772

4
Foreign Money Flows to China ( million)
Country 1979-1991 1992-1998 HK 13,208 125,300
US 2,382 17,963 Taiwan 199
19,458 Japan 1,740 18,890 Singapore
628 11,626 UK 862 5,830
5
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

6
Taiwan FDI in China
US bn
Source Taiwans Ministry of Economic Affairs
7
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

8
US Investment in China
bn
8 of total
7
18
7
1
5
17
9
U.S. FDI In China
of ChinaGDP
billion
1995
1996
1997
1998
1999
2000
10
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

11

• 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

12
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 Koreas 4th largest trading partner

13
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 PO (UKs transport
  and property company and Shougang Group (Chinas
  conglomerate with steel and machineary)
• one of the worlds largest bulk shipping
  operations of dry bulk carriers

14

• 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

15
FDI Distribution in China
16

• 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