Sino-foreign enterprises "join hands'' to make foreign investment in China continue to warm up
Since the start of the New Year, there have been repeated reports about transnational corporations' merger with Chinese enterprises:
On January 14 Netherlands-registered Mittal Steel, one of the world's biggest steel makers, signed an agreement to acquire Hunan Valin Steel Tube & Wire Co Ltd, a Shenzhen-listed subsidiary of Hunan Valin Iron and Steel Group of China. The merger deal has drawn high attention from Chinese iron and steel industrial circles and even that of the world. According to the analysis by people from iron and steel circles with the merger as a "bridge head'' for its entry into Chinese iron and steel industry the Mittal Steel will enter into China market.
On January 26, French Saint-Gobain acquired the Heilongjiang Mountain Abrasive & Grinding (Tools) Holding Co Ltd with an investment of 110 million yuan or 13.3 million US dollars. With the world's leading abrasive and grinding enterprise's entry into Mudanjiang, Helongjiang province has realized the acquisition of the biggest abrasive and grinding enterprise in Asia. Many people have noticed that the Japanese companies with Hitachi and Panasonic as their representatives have started their new round of advertisement publicity, which shows that Japanese transnational corporation groups have begun a new round of Sino-Japanese joint venture movement'' after silence for 10 years.
More signs show that batches of transnational corporations are dismantling the "joint venture bridges'' from now on after more than three years of China's entry into the WTO: they include British BP, German Basf AG, Bayer Group, Siemens and Whirlpool, Japanese Mitsubishi, Hitachi and Panasonic... From 2002 up to now the companies including Panasonic, P&G and Siemens have turned their joint ventures in China into whole foreign-funded companies. For transnational corporations, joint venture is a short cut for entering into China.
Despite of last year's implementation of macro-control policy in China and of that many people were worried about the slowdown of foreign investment in China, the actually utilized foreign investment in China was 60.63 billion US dollars in 2004, or 13.3 per cent increase over the previous year according to the latest statistics by the Ministry of Commerce.
By the end of last year, the accumulated amount of the actually utilized foreign investment in China hit 562.1 billion US dollars.
It is necessary for the warm-up
According to an authoritative report released by the United Nations Conference on Trade and Development (UNCTAD) China is still one of the most investment-attracting countries in the world.
Since China's enactment of the Law on Sino-Foreign Equity Joint Ventures in July 1, 1979, China has attracted foreign direct investment (FDI) for 25 years and a stable momentum of growth has been kept basically. Even if under the background of drastic decline of transnational direct investment the foreign direct investment in China was still ranked the first in the world on one occasion. Jin Bosheng, director of the FDI department of the Chinese Academy of International Trade and Economic Co-operation under the Ministry of Commerce believed that it is the two "trumps'' that lure investment from transnational corporations: cheap labor resources and the extremely broad consumer markets. With the gradual fulfillment of the promise China made when its entry into WTO more transnational corporations will come to China for development and localized production. It is necessary for foreign businesspeople to have investment warm-up in China due to the sustainable economic growth in China, increasing improvement of investment environment, the positive results brought about by macro-control measures as well as China as the key link in the global production chains of the transnational enterprises.
Just as what He Manqing, deputy director of the transnational corporation research center of the Research Academy attached to the Ministry of Commerce, said, "It is the management environment, and the industries the transnational corporations engage in and their development strategy that decides the tactics for transnational corporations. The former is external cause while the latter is internal cause. And the external cause is the condition while the internal cause is the decisive factor.''
Xie Yi, senior managing deputy president of Chia Tai Group, known in other places outside China as the Charoen Pokphand Group (CP Group), also expressed in
Beijing when talking of the group's "unchanged" investment belief in China that first, the group has confidence in China's macro-economy; second the group has a long-term strategy in its development in China. In 2004 when China intensified its macro-control in economy the Samsung Group invested 700 million US dollars in China in 2004, the fastest growth year in its China investment history. An official with the Samsung Group said it hopes to build a century-old shop in China.
Place emphasis on both "quantity'' and "quality'' and pay more attention to investment choice when attracting foreign investment
While expanding foreign direct investment scale in China there are obvious changes in industrial and regional structure. According to Chong Quan, spokesman of the Chinese Ministry of Commerce, judging from the industrial structure in the high-tech areas involving equipment production, electronic machinery and material manufacture there has been a sustainable increase in foreign investment with a big margin while the new foreign investment increase has been curbed effectively in the industries of iron and steel, cement and electrolytic aluminum. Judging from the regional structure, the investment in the old northeast industrial base has been increased in a big margin. The new number of enterprises, the foreign investment amount of contracts and the amount of actual utilized foreign investment in the three provinces of Helongjiang,
Jilin and Liaoning have been increased by 9 per cent, 40 per cent and 78 per cent respectively. The eastern part of China will maintain main status, accounting for more 80 per cent of the total investment; the central part of China has a strong momentum in investment increase; there is a comparatively weak investment increase in the western part of China, however the increase rate of the contractual foreign investment amount is 26 percentage points higher than the national average increase rate. The contract fulfillment rate of foreign investment enterprises increases to 50 per cent.
Recently many production and research and development links with high "content of gold'' have been shifted to foreign countries by developed countries. The emphasis of direct investment by transnational firms has been shifted to contracting the service industry from contracting the manufacturing industries in foreign countries. According to the forecast by UNCTAD the total amount of the contractual service industry in foreign countries will increase by 30 to 40 per cent annually. The competition in attracting foreign investment will be fiercer, which will bring rare chances to the expansion of the foreign investment in China.
But, more attention should be paid to investment choice when attracting foreign investment. The investment mainstream should be made on the projects with high added value and with high content of technology, and the investment should be in line with the orientation of China's structural adjustment and industrial development. Wang Mengkui, director of the State Council Development and Research Center, said recently that as the competition of the investment attraction goes fiercer in the world we should not let down our guard, on the contrary, we should continue to make active, rational and effective use of foreign investment. The key lies on the improvement of foreign investment attraction in order to optimize the structure of luring foreign investment.
