Better to assess China's FDI climate with companies' actions

BEIJING - In assessing the foreign direct investment (FDI) climate in China, foreign companies' actions are more reliable than their words, an economist from the United Kingdom said.

"The claim that China's FDI climate is worsening is shown to be false by the fact that foreign investors have been pouring capital into the country," said John Ross, a visiting professor at Antai College of Economics and Management, Shanghai Jiao Tong University, in an exclusive interview with Xinhua Friday.

Ross, who served as director of economic and business policy for mayor of London Ken Livingstone from 2000 to 2008, said that "As I learned clearly in eight years in charge of London's economic policy, it is necessary primarily to follow figures, which show companies' actions rather than what their spokespeople say."

From January to June this year, China saw 12,400 foreign-funded enterprises established, a year-on-year increase of 18.8 percent, and the actual FDI into China climbed by 19.6 percent to $51.43 billion, China's Ministry of Commerce said last month.

In 2009, FDI into China was $90.03 billion -- equivalent to 73 percent of the FDI inflow into the US despite the fact that China's economy was in dollar terms only one third the size of the US, said Ross.

"Relative to the size of their economies, the flow of FDI into China is twice as high as the FDI into the US. Put another way, in terms of the relative size of their economies, foreign investors find China twice as attractive to invest in as the US," he said.

The survey found that 62.5 percent of the foreign firms picked China as the key market in their global development strategy, and more than two thirds said they would expand their footprints in the Chinese market, citing China's great market potential, high-quality infrastructure, wide market access and low labor costs as the main reasons.

Zhang Xiaoji, a senior researcher of international business at the DRC, told Xinhua also on Friday that various facts and figures pointed to the attractiveness of China for foreign investors. "A fundamental aspect of a country's FDI climate is its overall economic conditions. The rapid and stable growth of China's economy has provided great opportunities for multinational companies," Zhang said.

An undeniable fact was that China remained a top destination for investment by foreign companies, and many multinationals were driving growth abroad through their Chinese operations, said Zhang.

In 2009, General Motors filed for bankruptcy in the US, but its sales in China grew by 67 percent. It sold 1.21 million vehicles in China in the first six months of this year, beating its six-month US sales of 1.07 million for the first time in history.

Having tasted the benefits of doing business in China and faced with uphill struggles elsewhere, many multinationals had said they would expand their business in China, Zhang said.

In 2010, there were 690,000 registered foreign companies in China, investing more than $1,000 billion, according to the MOC.

Chinese Premier Wen Jiabao said last month at a symposium attended by German entrepreneurs in Xi'an that it was impossible for a country whose investment climate was worsening to keep attracting such huge amounts of foreign investment.

John Ross said that sometimes what businesspeople said didn't matter so much. For them, "it is actually always their job to get a better deal and more concessions to increase profit further -- that's what they are employed to do so they can't be blamed for it," he said.

Among the people who pictured a worsening investment climate in China are also some anti-China politically motivated figures, Ross said. "They want to slow down China's economy, and they believe diverting FDI away from China will help do this."

However, "those people, who confuse politics with economics and business would normally make companies who listen to them lose a lot of money."