Skip to comments.China beats US as top investor choice
Posted on 09/23/2004 12:11:49 PM PDT by 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
Does anybody know the actual value of the Chinese currency? And why would anybody invest in China since they defaulted on the bond investments.
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.
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.
I would tend to think that some new, ground-floor businesses would be attractive for growth potential...
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!
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.
|Foreign Direct Investment in the U.S.
|U.S. Direct Investment Abroad
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.
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.
Once and for all, which way is it with you, Willie? Remember it cannot be both during the same transaction!!!
To bad we don't make stuff here any more.
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
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
Yes, it does.
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.
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.
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.
I'm also well aware that those conservative principals of self-reliance and self-sufficiency are an anathema to you. You would prefer to shackle our nation with dependency on foreign supplies of goods. That is why you denigrate the "protectionists" of national security.
You really ARE low, Joe. Very, very low.
Why not mention limited government too, Willie? Afraid to go that far?
It is thoroughly amazing that throughout history this argument has come about thousands of times. Whether to isolate and be in total autarky. Or, to exchange something of value - something that you have a surplus of - with someone else - who also has a surplus of some good - so that you, as a consumer, can have more of a diversity of products for consumption. If it works in your neighborhood, why is it not good on the world stage...unless of course you must discriminate against trading with someone who looks different from you.
It is quite interesting that you can not provide evidence of these actions subverting national sovereignty...what will you do now; site the WTO with their non enforceable legal powers? Let's ask one other question, Willie? Do trading partners tend to be more or less at conflict with each other? You may have to try thinking like a rational person to answer this one.
So, in answering my question the way you did; does that mean that you prefer not having any trade at all?
Nothing that extreme. Trade our surpluses for what we're incapable of producing.
There is a heck of a lot of investment in China. In 1983, when I first set up a factory there (selling into the Chinese and Asian markets, not back to the U.S.), 40 other companies set up shop in the same city.
Now the numbers of new factories in that city can be counted in the hundreds.
These are not shabby operations either. Very new, clean and proper facilities. Any small town in Ohio or Pennsylvania would drool at the chance to have just one of those factories set up in their town.
It is definately a different place to do business. But, it was generally easier to operate in China than I found it to be in the U.S. The paperwork regulations in the U.S. make even Chinese accounting regulations look like childs play.
The Chinese want your business and the welcome mat is out. The U.S. needs to get out that welcome mat and replace the comparatively hostile U.S. business climate.
[ tend to service the machines that make the goods rather then make the goods directly]
Don't the machines and the servicing labor force need to be in the same location?
I'll let the fact that you contradicted yourself slide. This revelation of your's is progress.
OK, what if we are capable of producing everything but some of those things are much more costly (in terms of labor) to produce in relation to other things that can be produced - things that bring consumers much more utility (satisfaction)? What if we couldn't possibly produce everything to meet the preferred domestic demand? Should we choose to skimp on things just because we're capable of producing everything but abhor someone else doing it for us more cheaply?
Yes!!! My point is that we are indeed still making stuff here. We do it with less labor than ever. I looked at my post again and don't thing that I left the impression of anything else otherwise.
Liberals are hostile to economic self-sufficiency - so strongly, that they believed in war to 'open up markets'. The most famous example is the Opium War, when Britain forced the Chinese Empire to allow the import of opium. This liberal belief in market expansionism has revived after the end of the Cold War.
--Liberalism, market, ethics
Have you seen "The Terminal". = Have you seen "The Terminal"?
I guess you can say I am too close to the situation? Folks that I worked with in Hong Kong were leaving and none too happy about the hand-over. Taiwan will be the deciding factor, that and their overt flaunting of international trade laws regarding patent and copyright infringement.
just like Thailand was the top choice in 1996
does this mean Willie is angry that foreigners arent investing here anymore?
Hey, if you have first or second hand knowledge, then you are much more familiar with the inner-workings of China than I am. I'm just going off of the things I read in business oriented publications and my belief that the "capitalism genie" will not want to go back to its bottle.
Thanks for the info as I wasn't clear on the meaning of "foreign direct investment". However, I did find the following definition of it at http://economics.about.com/cs/economicsglossary/g/fdi.htm:
Definition: FDI stands for Foreign Direct Investment, a component of a country's national financial accounts. Foreign direct investment is investment of foreign assets into domestic structures, equipment, and organizations. It does not include foreign investment into the stock markets. Foreign direct investment is thought to be more useful to a country than investments in the equity of its companies because equity investments are potentially "hot money" which can leave at the first sign of trouble, whereas FDI is durable and generally useful whether things go well or badly.
Hence, it doesn't include investments in stocks and is, as you said, usually thought to be more useful. It is interesting (and a bit disturbing) to see foreign direct investment going down so sharply. I would be interesting to know where the U.S. dollars dispersed via our trade deficit are going instead of to direct investments.
Despite the administration's ballyhooed hype of tax cuts and claims that our economy is more "productive", the dropoff in foreign direct investment is direct proof that our domestic economy has become more hostile to business investment. Yes, this IS a direct result of administration policies that favor outsourcing and offshore investment. The administration is actively engaged in economic warfare AGAINST our domestic industries and the prosperity of the American Middle Class that they employ.
I wasn't certain of that,
Thank-you very much for providing that definition.
I would be interesting to know where the U.S. dollars dispersed via our trade deficit are going instead of to direct investments.
That becomes more difficult to trace because it gets so widely dispersed. But as I indicated in my previous post, MUCH of it "returns" when foreign nations use it to purchase debt issued by our Treasury to finance our deficit spending. In essence, our gluttonous addiction to "cheap" imports is actually subsidized by the monthly installment payments that'll burden future taxpayers. There's no such thing as a free lunch.
i think it more likely that it is because there are excellent oppoetunites in China...for now
but you paleo-cons can never keep your stories stright. In the 1980s you hated foreign investment because it would caouse america to lose its soverignty, now youre angry because foreign investment is flowing ot other countries....make up your mind
Fabricating a strawman arguement again?
In the '80s, the battle was against the onslaught of imports, not foreign direct investment.
Same as now.
Your revisionism doesn't hold water.
>>That type of character - the display of integrity - is >>not seen often enough here
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Willing sacrifice is love. Jesus Christ was a Jew.
He was willingly sacrificed by God to bring light into the darkness.
His light shines in the darkness - but the darkness has never undestood it.