China overtakes United States as top destination for foreign investment

channelnewsasia.com ^ | 23 September 2004 0213 hrs | AFP

[Destro]

Time is GMT + 8 hours Posted: 23 September 2004 0213 hrs

China overtakes United States as top destination for foreign investment

GENEVA : China overtook the United States as a top global destination for foreign direct investment (FDI) in 2003 while the Asia-Pacific region attracted more investment than any other developing region, a UN report said.

China's strong manufacturing industry helped the country attract FDI last year worth 53.5 billion dollars, compared with 52.7 billion in 2002, the United Nations Conference on Trade and Development (UNCTAD) said in its annual report on investment flows.

Meanwhile, foreign investment in the United States, traditionally the largest recipient of such money, plunged by 53 percent last year to reach 30 billion dollars, the lowest level in 12 years, according to data from UNCTAD's World Investment Report 2004.

Flows to the Asia-Pacific region as a whole rebounded over the year to 107 billion dollars from 94 billion in 2002 driven by strong economic growth and a better investment environment, the agency said.

China was expected to continue to attract foreign companies, analysts said.

"According to our analysis, FDI in China has not peaked although their economic growth rates have fallen," UNCTAD economist James Zhan told journalists.

The outbreak of deadly Severe Acute Respiratory Disease (SARS) only had a marginal downward effect on investment activity as Asia emerged from the decline in foreign investment it had experienced since 2001, the report noted.

"Prospects for a further rise in foreign direct investment flows to Asia and the Pacific in 2004 are promising," UNCTAD's Deputy Secretary General, Carlos Fortin, said in a statement.

But the distribution of the new wealth was uneven across the region, with most of the money -- 72 billion dollars -- concentrated in north-east Asia.

Flows to south-east Asia rose 27 percent to 19 billion dollars, while the south merely received six billion dollars in FDI.

Resource-rich central Asia recorded 6.1 billion and 4.1 billion dollars flowed into the west.

The manufacturing sector remained the dominant factor that pulled investment into China, but a rise in investment in the services industry was noted elsewhere in line with the global trend, UNCTAD said.

Services, including finance, tourism, telecommunications and information technology, formed a growing proportion of foreign direct investment stock in the region -- up to 50 percent in 2002, the most recent figure available, from 43 percent in 1995, UNCTAD said.

UNCTAD said the growing tendency to shift some business activities overseas to places where labour costs are low but the workforce is skilled helped to raise the region's profile.

Asian companies were also growing in power and reach as investors in other regions, according to the Geneva-based agency.

China and India were joining Malaysia, South Korea, Singapore and Taiwan as sources of foreign direct investment, it said.

Asian firms, such as Hutchinson Whampoa of Hong Kong, Singapore's Singtel and Samsung of South Korea, again dominate the UNCTAD list of the top companies from the developing world.

- AFP

[Hoplite]

Not really a response, is it?

Try it again, in your own words - that way you'll have to read the material.

Quit being lazy already. If you don't have the time to compose an intelligent response, just wait until you do have the time and take it up then.

[LowCountryJoe]

Incomes alone - as I explained - do not indicate anything without taking into account real buying power. Economics 101.

You're absolutely right. It's is too bad for your side of the argument that the data referenced from the Census Bureau was in fact adjusted for inflation. And also, in 1967 - and I'm guessing here - they did not have cell phones, Internet service, time saving computer programs that increase productivity, transportation equipment (including autos) that are much more efficient, increased leisure time for people who make that a priority in their lives, longer life spans...ah screw it, life sucks, man. I can't keep a straight face here.

[WilliamofCarmichael]

RE: What did I tell you about posting spam?

A reference is "spam.?" I often post "spam."

If I want to back up my statement, for example, that the "free traders'" business partner China's PLA actively supported radical Islam's Taliban I google for references to post along with my statements. What's wrong with "spam?"

I depend upon "spam" to backup my thoughts. Google is good.

[LowCountryJoe]

Now then as someone who with so much to say on world trade you must understand that for 20 years the Japanese government uses American dollars earned in trade to buy US Treasuries. This keeps the supply of dollars artificially low. The Chinese have learned from this, and purchase T Bills to keep their currency floating in a very narrow range. Experts in this country have been on record as stating that this amounts to a 40% subsidy on the Chinese currency.

You are incorrect. When trade occurs between two countries, the country exporting the good wants to be paid in its home currency. The purchasing country has to find a bank willing to make the exchange. The now increased demand for the importing country's currency raises the rate of exchange in favor of the foreign currency in relation to the dollar. Therefor, the dollar's supply in this case is actually high (the not necessarily artificially). It is also important to note that these transaction take place between companies and not governments [though I do understand that some of you out there reading have a romance with thinking of the government as the actual deal makers].

It is true that the Japanese and the Chinese do buy U.S. Government debt with the US Dollars. Technically it is the bank that made the currency exchange who buys the debt. Why do they do this? It's because they really don't have a use for the U.S. Dollar in their country. [actually, in the case of the dollar, being that it is the most prominently accepted currency in the world market, some people - even some consumers - in foreign countries don't mind holding them.]

But, it's interesting to note that these foreign countries do not have to purchase our government debt; they can also purchase anything of value that is for sale in dollars here in America.

Typically they buy the debt. Our companies and consumers borrow this money and use it for investment endeavors (in the case of the businesses) or current consumption/mortgages (in the case of the consumer).

In the case of the Chinese Yuan, it is undervalued (not subsidized) by a speculated 40% because the Chinese peg their currency to ours (8.4:1, I think). I'd go into it a little more in depth - as I've done on another thread - but I think you should digest that little bit first until we move on to the next lesson.

last, but not least. You and I agree on FDR. On the government's role in keeping us competitive...I say it should be hands off since I believe the government's role is to provide us with a representative government, make and enforce laws that protect our individual rights (rights are not equal to entitlements), and provide for a common defense. Curiously absent on my list is market interference!

[Hoplite]

Using linked material to back up your statements is encouraged.

But you're not talking about using just the links themselves, or simply cutting and pasting entire articles in place of something you yourself have written, as Destro is wont to do.

Regards.

[Last Dakotan]

Two points in reply; 1. China is a communist country. The companies are the government. Free transactions between individuals and foreign companies are not allowed. So yes, the Chinese government is the actual dealmaker in this case. 2. OK, we agree that the Chinese "peg" (I prefer to use the terminology of subsidizing the US currency to prop up its value, but the end result is the same) their currency. Once again I ask is this a problem and what should be done about it? My answer is hell yes it is. The resulting predatory pricing drives out domestic competition that would otherwise be competitive destroying American capital and livelihoods.

[Destro]

again - like I said to just throw the real incomes and not compare it to purchasing power is a false test.

Price of a house then and now? Two income housholds over one? The cost of higher education? Medical costs?

[LowCountryJoe]

I give up! You're obviously out of my league and I'm in submission to your knowledge [I leave our conversations feeling like it is you who is taking credit for having taught me things]. I'll let you do the critical thinking about the benefits versus costs of what the Chinese do to their own currency. Hint: there are tradeoffs for them. Just as everything in this world...there ain't no such thing as a free lunch. And, since you know what the heck your talking about, I'm sure you can figure it out.

Oh, and when you do figure it out, you can post it and then genuinely take some credit - assuming it's accurate!!!

[Destro]

Spam anyone?

http://csmonitor.com/2004/0908/p03s01-usec.html

Salary squeeze threatens middle America

By some measures, fewer people are managing to stay in the middle class.

But recent Census data confirm that the median household income - a level where half of US households earn more and half less - has fallen by $1,500 between 2000 and 2003.

[Last Dakotan]

I leave our conversations feeling like it is you who is taking credit for having taught me things

Man, this whole website isn't big enough for your ego...

[Hoplite]

Are you implying prices change over periods of time?

Get out!

What shall we call this phenomenon?

Why don't we call it "inflation"?

We should get the government to track this "inflation" thing: how's about we get the Dept of Labor's BLS to track these changes?

Does that sound like a plan?

My suggestion is that they call it the "Consumer Price Index", but if you can come up with a better name, more power to ya.

Now that we've got that sorted out, what are the chances we could get the Census Bureau to put out a set of annual statistics that take inflation into account?

What do you think, Destro? What are the chances?

A damn site better than your following the link in my #188, which if you did, would have illustrated to you that we had a recession in late 2000, and that median income is still on an upward trend.

Can you get your head in the game here Destro?

[WilliamofCarmichael]

There's also that pesky aggregate income distribution.

I make no judgment one way or the other about the "fairness." That's life. It's also a fact.

To wit, to pick just one, the lowest quintile, in 1967 it had 4.0 percent of aggregate income. In 2001 it had just 3.5 percent of aggregate income. The remaining three lowest quintiles had bigger shrinkage. The highest quintile had the only increase in share of aggregate income.

Regardless of legitimate cries of "harder workers, smarter workers" there ain't many of them millions and millions of ILLEGAL immigrants taking six-figure jobs.

I've referenced many times the Pew Hispanic Center study of a couple of months ago that claimed that about 28 percent of the 1.4 million or so jobs created over the past year were taken by recent immigrants. Established immigrants and citizens were not hired, obviously, for those jobs. IMO, the "cheaper" labor prevailed and drives wages down. IMO.

Some argue that the lowest quintile folks get social benefits that increase their share. Fine. I know that it is true. But I believe the tables do tell it the way it is and suggest that the middle income folks' share is shrinking.

[Destro]

you and your "spam"!

[LowCountryJoe]

Ya know, I'm sure that even Neo got tired of whoopin' up on all of the agents during the Matrix II. There are just too many of you that jump in during the middle of a thread without reading some of the earlier posts - heck, I do it from time to time too. But there are problem with doing that. One can miss topics that were already covered, like post#89, its reply, and that one's counter reply.

And not only do I have a big ego, I also have much enthusiasm and optimism for the future of America. Besides, this board is littered with large egos in case you haven't noticed and there's plenty of room available. At least my ego isn't so large that I'll not concede when someone, on the other side of an argument that I'm engaged in, makes a good point; or, when I'm wrong about something and get corrected.

[LowCountryJoe]

U.S. equity markets were ravaged by sell-offs that corresponded to outrageously high price to earnings multiples (equity euphoria) and interest rates on debt instruments that looked very appealing in comparison. When wealth holders wizened up that's when slide of the markets began (many people should have see the telecommunications meltdown as a prelude...but they didn't). As the equities markets were recovering in 2001, 19 radical Muslims used box-cutters to gain control of four aircraft...the end result (just in dollar terms) was approximately another two and a half trillion dollars of wealth evaporation. I think they we can all agree that it is the wealth holders in this country who create opportunities by putting their wealth to work through the lending or investing of their money. When $2,500,000,000,000 (or if you prefer, twenty-five hundred billion dollars! Or, if you further prefer, two-and-a-half million million dollars) there will no doubt tend to be some downward pressure on income as a result.

[LowCountryJoe]

Fellow "Neo" ping. I really need to learn to proofread my stuff.

[Hoplite]

My ego is too great to suffer the thought of an equal.

There can be only one!

Oh, wait - my bad. Wrong movie.

= )

[LowCountryJoe]

Hey,

What do you make of this?

...CPI is not a direct measure of cost of living. Over-simplified, CPI assumes the same purchase of the same market basket in the same fixed proportions from month to month with a major update about every 10 years based on changes in consumer spending...

...In a nutshell, the Boskin Commission Report (Michael Boskin Chairman) stated that the true cost of living has increased at a lower rate than CPI. In other words, the CPI has overestimated experienced inflation at a rate of about 1.1% per year. The Boskin report identified four types of bias (systematic error) in CPI.

1) Substitution bias - Changes in what is purchased. Substitution bias results from the CPI use of fixed products even though consumer behavior changes rapidly. For example, if the price for beef increased very rapidly, consumers might begin to eat more poultry and the price of beef might therefore have little real effect on their cost of living.

2) Outlet Substitution Bias - Changes in where goods are purchased. Many consumers now purchase more from discount retailers than was true in the past.

3) Quality Change Bias - Quality improvement of products. As products become more efficient, durable, and reliable, the expenditure for their use, repair and replacement decreases.[No! That "cheap crap" couldn't possibly be lasting longer. I don't believe it] < sarcasm >

4) New Product Bias - Changes in available products. Products become available at a faster rate than changes in the CPI are made. Home computers, VCRs, microwave ovens, cell phones, cable TV, and many other products are introduced and become a part of the fabric of life more quickly than reflected in CPI changes in purchasing habits.

[Hoplite]

Does that mean that the Aug 2003 to Aug 2004 CPI increase of 2.7% should be 1.6% or 2.67%?

Yeah, I'm getting lazy now that I've kicked the baby.

Either way, or even if the CPI remains as stated by the BLS, we're not looking too bad all things considered.

[Toddsterpatriot]

Does that mean that the Aug 2003 to Aug 2004 CPI increase of 2.7% should be 1.6% or 2.67%?

1.6%.