China's FDI Gains not at ASEAN's Expense: Report

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Last updated at: (Beijing Time) Wednesday, November 20, 2002

China's FDI Gains not at ASEAN's Expense: Report

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A report written by economists at Singapore's Ministry of Trade and Industry points out that China's gains in foreign direct investments (FDI ) has not been at the expense of ASEAN and the alleged threat posed by China to ASEAN has been overstated.

The report released Monday also points out the Asian financial crisis in 1997-1998 was the real reason for the post-1997 sharp drop in FDI flows to ASEAN and the decline was not closely related to China's increasing attractiveness as FDI destination.

The perception that China is getting the lion share of FDI in Asia has been based on the assumption that FDI flows to Asia is a zero-sum game, i.e. an increase in FDI to one country must be at the expense of another country, the report comments.

The report says data from the 1990s showed that this was not the case of China and ASEAN as both economies had experienced strong FDI growth throughout the period from 1989 to 1997, during which FDI flow to China shot up from 3.4 billion US dollars to 44 billion US dollars while FDI to ASEAN-5, namely, Indonesia, Malaysia, the Philippines, Singapore and Thailand, burgeoned from 7.6 billion US dollars to 27 billion US dollars.

Similarly, ASEAN and China both experienced a drop in FDI during the Asian financial crisis and FDI to ASEAN and China moved up in tandem again in 2001, the report says.

"In a nutshell, the trends and patterns of global FDI flows toASEAN-5 and China have not shown that the growth of FDI to China has been at the expense of ASEAN-5," the report underlines.

Investment to ASEAN and China can grow concurrently as was before the Asian financial crisis, the report reaffirms.

The report also notes that main investors in ASEAN have not been diverting FDI to China and from 1995 to 2000 developed countries, namely the United States, Japan and the EU, consistently invested more in ASEAN-5 than in China.

Citing the economic logic that a country with larger GDP should attract more FDI than another country with a smaller GDP, the report says that China's share of world FDI has not been excessive.

On FDI outlook for China, the report said that FDI outlook for China would be even brighter in the years ahead as China's entry into the WTO will create more opportunities for foreign investments.

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