China beats US as top investor choice

Daily Express ^ | Friday, 24 September, 2004 | AFP

[Willie Green]

For education and discussion only. Not for commercial use.

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

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

Strong manufacturing industry in China helped the country attract FDI last year worth US53.5 billion (RM214b), compared with US52.7b (RM210b) 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 per cent last year to reach US30b, the lowest level for 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 said.

The outbreak of deadly Severe Acute Respiratory Disease (SARS) had only 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 Sec-Gen, Carlos Fortin, said in a statement.

But the distribution of the new wealth was uneven across the region, with most of the money - US72b (RM288b) - concentrated in north-east Asia.

Flows to south-east Asia rose 27 per cent to US19b (RM76b), while the south merely received RM6b (RM24b) in FDI.

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 per cent in 2002, the most recent figure available, from 43 percent in 1995, UNCTAD said.

UNCTAD said that a 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.

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

[Willie Green]

New Labor Department Report Reflects Bush Administration's Lack of Seriousness in Addressing Problems Facing U.S. Economy

[mabelkitty]

Does anybody know the actual value of the Chinese currency? And why would anybody invest in China since they defaulted on the bond investments.

[Brilliant]

I guarantee you that the amount of money invested in the US vastly exceeds that invested in China. What we're talking about here is just foreign investment. So what? American money invested in America is not considered foreign investment. American money invested in China is considered foreign investment.

[Alberta's Child]

The biggest factor in the drop-off of foreign investment in the U.S. has been the declining value of the U.S. dollar against most other world currencies.

And yet that decline is precisely what would make the U.S. competitive in terms of exporting manufactured products to other nations.

In other words, you can't have it both ways. We can have a strong dollar and attract lots of foreign investment, or we can have a weak dollar and a strong export-based economy. Anyone who thinks we can do both at the same time is utterly delusional.

[trebb]

I would tend to think that some new, ground-floor businesses would be attractive for growth potential...

[GOP_1900AD]

In his book "Imperialism" Lenin was obsessed with finance capital and, using his skillful aesopian language, implored the Communists to sieze not only the means of production, but also to seize finance capital. During the 20th century, the Communists went about this rather crudely and typically just destroyed the finance capital institutions of their own countries. Now in the 21st century, they have become a lot more clever about it. Now, they simply dupe the finance capital institutions into forgoing the West and investing in the Communists. They have also infiltrated the institutions themselves. Firstly, they have H1Bs not to mention recruited Western agents, infiltrated into these firms operations within Western countries. Meanwhile, in the Communist countries, they directly control them and manipulate them using various means. On this latter point, it would be highly naive to assume that, for example, a Citicorp operation in a communist or reputed recovering communist country would not have within it's upper management ranks a number of government operatives from the host country!

[Willie Green]

And yet that decline is precisely what would make the U.S. competitive in terms of exporting manufactured products to other nations.

Imports have been increasing more rapidly than exports, that's one of the reasons the Trade Deficit keeps hitting record highs.

We can have a strong dollar and attract lots of foreign investment, or we can have a weak dollar and a strong export-based economy.

Why should we want to be an "export-based" economy when we've been blessed with natural resources and are the largest consumer market in the world?

We can easily make America more attractive to business investment by eliminating the corporate income tax and implementing tort reform. This needn't weaken the dollar through deficit spending, either. Treasury revenues "lost" by the corporate income tax reduction can be offset by levying a relatively low, flat-rate revenue tariff on imported goods. Other measures to reduce federal deficit spending and balance the budget would also strengthen the dollar.

[Willie Green]

	1994	1995	1996	1997	1998	1999	2000	2001	2002	2003
Foreign Direct Investment in the U.S.	45,095	58,772	103,398	103,398	174,434	283,376	314,007	159,461	62,870	29,772
U.S. Direct Investment Abroad	73,252	92,074	84,426	95,769	131,004	209,392	142,627	124,873	115,340	151,884

Comments?

[remember]

Comments?

I haven't had much time to look at the numbers but it does seem like foreign investors were caught up in the U.S. stock bubble, just like U.S. investors. In looking for some related numbers, I did run across a story on the BEA site that at http://www.bea.gov/bea/newsrelarchive/2004/intinv03_fax.pdf which states:

In regard to transactions, foreign acquisitions of assets in the United States were $829.2 billion in 2003, up from $768.2 billion in 2002, and the second largest on record after $1,046.9 billion in 2000.

U.S. acquisitions of assets abroad were $283.4 billion in 2003, up from $198.0 billion in 2002, and down from a record $569.8 billion in 2000.

I assume that means that the dollars generated by our exploding trade deficit were used to purchase assets other than by investments in our stock market.

[LowCountryJoe]

I believe the actual value of the Yuan Renminbi (CNY) is pegged to the USD at somewhere around 1 USD for 8.4 CNY.

Also, typically investors (or in many case speculators) are taking large risks in China in their equities market and not their debt markets. It is estimated that the Yuan is undervalued by around 40% if it was allowed to float freely (not be pegged to the dollar any longer). Since China is becoming more market friendly - though still communist country - and their currency is estimated to be undervalued, many people see China as a place to take a risk so as to get a high payoff if China continues to liberalize their policies - heck, just a free floating currency would be a potential boon for speculators.

I hope that helped.

[LowCountryJoe]

Remember Willie, NET CAPITAL OUTFLOW is equal to NET EXPORTS. If there really is more exporting, then that means we're not running as high a trade deficit with them. If we are exporting a little more than what we were doing before, then this means some jobs were not lost. Willie, you're really going to have to take a side on which way you want it. Do you want the cheaper goods from them while they have the claims on our assets or do you want them to have our goods with our claims on there assets...you cannot have it both ways. Unless of course your dumb enough to suggest that you want them to have our goods and you want them to have claims on our assets. Heck, if that's the way you feel, I'd love to do some transactions with you.

[LowCountryJoe]

Perhaps I really should have put the proper punctuation on that last post. I am asking you a question, Willie! I really want to know which way you want it. Which do you prefer: being an importer or an exporter? To be the custodian of someone else's money that you pay them the use for (or have partial ownership and share risk with) or the lender (or investor) who gives it to the custodian who will presumably do the same as you did?

Once and for all, which way is it with you, Willie? Remember it cannot be both during the same transaction!!!

[jpsb]

Not a good sign, if venture capitalist are bailing then how long before other investors bail out too. And what happens to our HUGE debt when they decline to buy our bonds or even worse, sell bonds they hold. The crash of all crashs could be right around the corner.

To bad we don't make stuff here any more.

[DarkWaters]

They have also infiltrated the institutions themselves.

This is very large danger. They know the inner workings and know what weakness they have so that they can be exploited to their advantage later on or maybe even right away.

[Willie Green]

To be the custodian of someone else's money that you pay them the use for (or have partial ownership and share risk with) or the lender (or investor) who gives it to the custodian who will presumably do the same as you did?

Neither a borrower nor a lender be;
For loan oft loses both itself and friend,
And borrowing dulls the edge of husbandry.
This above all: to thine own self be true,
And it must follow, as the night the day,
Thou canst not then be false to any man.

~ William Shakespeare, "Hamlet", Act 1 scene 3

"And I sincerely believe, with you, that banking establishments are more dangerous than standing armies; and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale."

-- Thomas Jefferson to John Taylor, May 28, 1816

[Willie Green]

I assume that means that the dollars generated by our exploding trade deficit were used to purchase assets other than by investments in our stock market.

Yes, "foreign direct investment" usually means more than simply purchasing stocks on the NYSE. It includes acquisition of real estate, timber, mining and water rights and purchase of assets from other businesses, (hotels, factories, office buildings, warehouses, strip malls, etc. etc.) Foreign direct investment is usually good, if they actually operate these businesses. Sometimes it's not-so-good, if the acquisition is merely intended to reduce competition and consolidate the market.

But that's drifting off-point a little...

The other way that the dollars we squander with our Trade Deficit is when foreign nations purchase the debt issued by our Treasury to finance the federal budget deficit. This is NOT good because it commits paying an increasing proporation of our tax dollars directly to foreign governments (as interest payments on the debt) before we can spend anything to pay for the operation of our own government. Foreigners own half US debt, tipping point unclear

[mabelkitty]

Yes, it does.
Thanks!
I was reading about legislation last year concerning China investors getting screwed, and Congress requesting they make good on the bond.
With their rapid, growth and their recent transportation changes, I wouldn't be investing in China so much as the corporations that excel at providing the goods and services of growth.
IMHO, China isn't going to liberalize their policies any more than they absolutely have to to keep the rest of the world quiet.

[LowCountryJoe]

Too bad we don't make stuff here any more.

We still make some stuff but now the labor resources tend to service the machines that make the goods rather then make the goods directly. If you're so concerned about this, why don't you take some risk and employ some people to work for you in some industry that makes handmade goods? If you can find sufficient demand for the good to cover your costs, I'll be one of you first investors if you give me the opportunity.

[LowCountryJoe]

How about your answer, Willie? Don't give me classical quotes from historical players that philosophically bash financial institutions. How about an honest to goodness answer from that post that you responded to?

Let me offer this disclaimer: I do not want to read something from you that suggests that you want perfectly balanced trade - it doesn't happen in the real world. I'd like for you to be psychologically balanced too but that's not going to happen either. You may ping all your fellow protectionists or, more discreetly, send them private messages to come to your aid on this thread but I do request the you provide an answer.

[LowCountryJoe]

They are liberalizing their policies to embrace markets on the macro level, slowly but surely. This, however, doesn't necessarily mean that they're liberalizing policies at the micro level. Although, they do seem to have internal conflicts between the Beijing school of thought and the Hong Kong school of thought that will be resolved and these changes should affect the microeconomics. I personally think that the remainder of China will move the direction of Hong Kong over time. Everything has its seasons, therefore I disagree with your outlook.