The China Investment Challenge

Mr. Yu Hua, Deputy Director General, China Investment Promotion Agency, Beijing, China

The first is the high return on foreign investment in China.

Moreover, tensions with China over territorial claims in the East China Sea may adversely affect trade and foreign direct investment.

For example, Asian investment is booming again, led by China.

In addition to investment in private property in Europe, Asia, Middle East (Bahrain, UAE, Qatar, India, China and Korea) through the private property fund or direct investment.

In other words, rather than shifting from investment led to consumer led growth, China appears to be continuing along its investment led growth track.

In May 2004, he led an investment mission of 500 Brazilian business entrepreneurs to China.

China injected more than 46 billion into the China Development Bank and the China Everbright Bank through investments by its national SWF, the China Investment Corporation.

China is running external surpluses because its saving exceeds its investment.

Moreover, today s warm politics, cool economics trend is the reverse of the cold politics, warm economics pattern under Koizumi. Last year, Japan s committed investment projects in China fell 24 from 2006, while actual investment volume decreased by 25 , partly owing to regulatory changes in China regarding foreign investment.

European investment in the US is eight times larger than its investments in China and India combined.

It also has more than 7,500 enterprises operating in China, with gross investment totaling 18.5 billion.

Fixed investment in China is close to 50 of GDP which must be a world record.

For China, it is excessive reliance on fixed asset investment for growth.

The G77 and China were concerned about the impact of investment disputes.

Unlike Great Britain in the nineteenth century, China does not view its surplus as an investment engine.

Growing demand for energy, metals, and minerals particularly in China has driven unprecedented levels of foreign investment.

Comparing Pakistan's investment position with those of India and China, he stressed the need to continually analyse and evaluate investment determinants, including in relation to government policy.

China is providing investment insurance and tax breaks to companies that invest abroad.

For example, investment promotion agencies in Denmark, Sweden and the United Kingdom have already established a presence in China.

The China Power Investment Corporation is the developer. Under the agreement, China would receive about 90 percent of the power generated.

In China, a hard economic landing looks increasingly likely as the investment bubble deflates and net exports shrink.

So China is stuck in a currency creating cycle GDP growth encourages investment, which boosts demand for capital.

That is why China established its sovereign wealth fund, China Investment Corporation, and why CIC decision makers are seeking more FDI opportunities.

Of course, foreign investment in the TAR is a drop in the ocean relative to that in China as a whole.

China is worried that its more than 1 trillion investment in US Treasury securities will not hold its value.

Finally, after welcoming foreign investment, which contributed greatly to Chinese manufacturing growth and export competitiveness, some in China would now tighten restrictions on foreign investment to protect China s domestic industries.

China has traded much investment in physical infrastructure in places otherwise shunned Angola, Sudan, and Zimbabwe for access to natural resources.

If China runs an investment income deficit with net assets of almost 2 trillion, how will it make the transition to an investment income surplus?

Finally, Europe s crisis presents an attractive opportunity for China to expand its direct investment there.

In China, November s Third Plenum of the Communist Party Central Committee will show whether China is serious about reforms aimed at shifting from investment led to consumption led growth.

This implies increasing minerals exports to China, together with growing Chinese investment in the region to secure sources of supply.

This would require politically difficult shifts in consumption and investment, with America increasing its savings and China increasing domestic consumption.

In early 2000, China held only 71.4 billion of US debt and accounted for 8 of total foreign investment in the US.

The process of opening the retail sector in China began in 1992 when foreign investment was allowed in retailing on a trial basis.

This model presupposes that China will develop domestic capital, rather than simply relying on foreign investment.

China, for example, had signed many BITs, but no investment cases had been brought against it.

Moreover, investment rates in the newly industrialized economies of Asia have never recovered to their pre 1997 8 crisis levels, and investment rates in the rest of Asia outside China have fallen off as well.

With fixed investment nearing the unprecedented threshold of 50 of GDP, they fear that another investment led fiscal stimulus will only hasten the inevitable China collapse scenario.

Of equal importance were the rise of China and the decline of investment in Asia following the 1997 1998 financial crisis.

This is not all bad, because China can certainly use more public investment in social sectors such as health and education.

China has similar problems, with the investment growth nexus threatening macroeconomic stability witness the overheating that occurred in 2003 and 2004.

Indeed, even after the new stimulus package, China will still depend on investment and export for growth.

Since then, China has aggressively pursued a fast growth, export, and investment heavy model of economic development.