Foreign Investment in China
• Presentation Outline
• General Background
• Who are investors
• When, Where and How
New Market
• Since 1978, Deng Xiaoping’s open-door
policy, many foreign businessman pushed
their way to China
• Industries-- infrastructure projects (railway
roads), steel industry, telecommunications,
and technology
Total (Realized) FDI in China
Year
FDI ($ billion)
1984
1986
1988
1990
1992
1994
1996
1997
1998
1999
2000
1.419
1.875
3.194
3.487
11.008
33.767
41.726
45.257
45.463
40.398
40.772
Foreign Money Flows to China
($ million)
Country
1979-1991
1992-1998
HK
13,208
125,300
US
2,382
17,963
199
19,458
1,740
18,890
Singapore
628
11,626
UK
862
5,830
Taiwan
Japan
Overseas Chinese Investors
• Hong Kong and Macao
• Taiwan
• 55 million ethnic Chinese living outside
mainland China (21 from Taiwan and 6
million from Hong Kong)
– Four tigers --HK, Taiwan, Singapore, Korea
(only Korea is Not Chinese)
– Thailand, Indonesia, Malaysia
Taiwan FDI in China
US$ bn
1.5
1
0.5
0
1994
1995
1996
1997
Source: Taiwan’s Ministry of Economic Affairs
US Investors
• Many big and small-to-medium sized firms
have invested in China
• For Example-- Boeing, Monsanto, GM
• Walt Disney– joint venture with Post and Telecommunications
Press
– Chinese-speaking Mickey Mouse and Donald
Duck in 1987 but pulled out in 1993
US Investment in China
$bn
8% of total
7%
18%
17%
7%
1%
5%
U.S. FDI In China
$billion
% of
China’GDP
1995
3.083
0.442
1996
3.444
0.422
1997
3.239
0.364
1998
3.898
0.409
1999
4.216
0.423
2000
4.384
0.406
Japanese Investors
• First investment, 1979
• Investment picked up in 1990s, including
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–
–
–
–
–
–
textiles,
electrical applications,
food and chemicals,
supermarket operators (Yaohan and Daiei),
trading firms,
agriculture,
transportation, energy and communications
•
•
•
•
Japanese (continued)
held-back technology
A careful long-term investment strategy
For example, Dalian
– Initial investment in trading company to build
structure
– follows by financial firms
South Korea
• Late 1970s, first unofficial contact
• 1991 signed agreement on Most Favored
Nation (MFN) status
• Initial investment in Yellow Sea Economic
Zone (including Shandong and Liaodong
peninsulas)
• Later extended to the South
• China is Korea’s 4th largest trading partner
European Investors
• Britain, France, Germany and Italy are
ranked by Chinese top 10 investors
• Britain heavy investment in China
– In 11/1997, joint venture of P&O (UK’s
transport and property company and Shougang
Group (China’s conglomerate with steel and
machineary)
– one of the world’s largest bulk shipping
operations of dry bulk carriers
• Germany
• low profile but one of the largest investment
in automobile industry (e.g. Volkswagen
and Daimler-Benz)
• other industries: satellite technology, solar
collectors, electronics, telecommunications,
power plant and others
FDI Distribution in China
Provinces
1992-1997
Flows
Share (%)
Coastal Areas
174079
87.47
Guangdong
55016
27.64
Jiangsu
24007
12.06
Fujian
20316
10.21
Shanghai
18254
9.17
Beijing
7010
3.52
Others
49476
24.87
24935
12.53
Inland Areas
• 1998 survey by 96 European companies
express problems in China (FT- 2/16/98):
– counterfeits of their products
– competition from imports (esp. Hong Kong)
– Retaining staff
•Royalty bonus
•career development,
•housing allowance, housing loans
– Preference for wholly-owned subsidiary vs
joint venture