China to develop into net capital exporter coming years

16:52, May 18, 2011      

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Chinese investments in foreign countries are growing rapidly. If the world economy continues to improve steadily, China's annual outbound direct investments will likely exceed 100 billion U.S. dollars in the next few years, equaling the current annual foreign direct investments in the country. This indicates that China will soon develop from a net capital importer into a net capital exporter, said Liu Zuozhang, director of the investment promotion agency under the Ministry of Commerce, in a recent interview.

Liu said that China has actively participated in the process of economic globalization and achieved rapid economic growth in the past several decades. Thanks to the reform and open door policy, Chinese companies have stood the test of globalization, gaining rich experience and amassing large funds in the process. It is natural for them to invest more and more abroad. Given the development trend of the world economy, encouraging domestic enterprises to invest overseas on the basis of equality and mutual benefit has become one of China's national strategies.

Chinese investments in Argentina have increased sharply in recent years. In 2010, China accounted for over half of the foreign direct investments in Argentina and became the third largest investor in Latin America, according to a report recently released by the U.N. Economic Commission for Latin America and the Caribbean.

Liu said in the interview that the significant increase in investments in Latin America is a perfect example of the surge in Chinese investments worldwide. China's outbound direct investments in the non-financial sector amounted to 59 billion U.S. dollars last year, covering 122 countries and regions. If the world economy continues to improve steadily, China's annual outbound direct investments will likely exceed 100 billion U.S. dollars in three to four years.

Despite the rapid growth of investments, large-scale overseas investments by Chinese enterprises have various types of risks and some Chinese enterprises have suffered huge losses because of political, economic or social turmoil or major changes in industrial polices inside the countries where they invested. This has caused Chinese enterprises to be anxious about overseas investments.

Liu said that any investment runs risks, including Chinese enterprises' overseas investments. As investing abroad is a long-term process, enterprises should have plans for long-term operations inside the countries in which they seek to invest. Chinese enterprises should make prudent and comprehensive evaluations and conduct all-round, forward-looking surveys before investing abroad. They should take into full account various aspects of risks, including governments, laws, economic growth, management philosophies, consumption and labor quality. Furthermore, enterprises should invest in countries with social and political stability, a sound legal mechanism and relatively high labor quality.

In addition to investment risks, Chinese enterprises have also encountered the industry access thresholds. Some countries have kept Chinese enterprises out of their markets using economic security and industry policies as excuses.

In response, Liu said that every country has exercised its sovereignty to formulate its own industry polices giving foreign investments partial treatment. China has also taken similar measures to protect some emerging and strategic industries. The current issue lies in that foreign governments are doubtful of Chinese enterprises, particularly large state-owned enterprises. These governments suppose that Chinese enterprises do not operate under the market mechanism because they can gain low-interest loans and policy support from the Chinese government. If these governments allow such Chinese enterprises to enter their local markets, the Chinese enterprises will distort the local market competition.

Liu said frankly that it is not easy to remove these doubts and concerns, so it is difficult to fully overcome such obstacles over a short period of time. This requires China and investment-receiving countries to conduct consultations and exchanges at the government, enterprise and non-government institution levels in order to achieve mutually beneficial and win-win results for both sides.

By People's Daily Online

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