The China Investment Challenge

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

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

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

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

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.

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

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

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

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

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?

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.

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

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

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

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.

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

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.

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

This balance sheet configuration has helped China to respond to shocks and sustain high levels of public sector investment.

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.

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

Indeed, China has done this by expanding its qualified domestic institutional investor program to allow more investment abroad.

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

Unlike most countries, China has not struggled to get public sector investment up to levels that support sustained high growth.

First, China will begin to wean itself from the manufacturing model that has underpinned export and investment led growth.

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

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

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

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.

From 2008 to 2012, fixed asset investment in China amounted to 136 trillion, or 2.6 times more than the country s 2012 GDP.

In fact, over the next decade, as China attempts to move up the value chain into services and adjusts to a shrinking workforce, its investment requirements will shrink and its investment rate will fall sharply.

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

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

That said, India has relied much less on foreign direct investment than China, and has even exported FDI to OECD countries.

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

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.

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

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

However, for China to succeed, higher investment in research and development, together with a fundamental overhaul of the educational system, is essential.

For decades, China has been investing its vast savings abroad, waiting for greater efficiency in domestic investment allocation before starting to dissave.

China must remain committed to resuscitating the stalled Doha Round of multilateral trade negotiations, and support a global agreement on investment flows.

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