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Breaking down China's overseas investment, Part II: A source of warmth amid economic chill

By Li Zhenyu (People's Daily Online)

09:54, December 17, 2012

During the global financial winter, a breeze of fresh air from Chinese investors bring warmth

During the global financial winter, Chinese investors bring warmth. (Photo/China Daily)

Related: Part I: The Makings of a Global Phenomenon

Since the outbreak of the global financial crisis, China's outbound investment has proved to be the answer to the ailing economies' prayers. Chinese investors have lent a big hand in helping them get their economic houses in order and enhance their economic prosperity.

The Tangible Wealth

From a global perspective, the increasing Chinese overseas investment has had a positive impact both upon the world economy and China's trading partners.

"As global financial woes spread, China's outbound investment provided timely support for the world's financial sector and, to a large extent, eased the financial crisis," remarked Shi Mingshen, one of China's most influential financial commentators.

"It is evident that China's direct outbound investment could help boost international trade while avoiding trade frictions with the country's partners," Cui Xinjian, a professor and deputy dean of the School of Business at Central University of Finance and Economics (CUFE), observed.

"If China's outbound direct investment (ODI) continues to grow at this rate, it will surpass the country's foreign direct investment (FDI) in a few years, and that would be potentially beneficial to China's export partners," said Kevin Chu, a senior business consultant and former Chinese diplomat.

From the host countries' point of view, Chinese investment may bring them a wealth of benefits, including both the tangibles and intangibles.

Increased tax revenues and more job opportunities are the most tangible ones.

According to official statistics, in 2011 alone, Chinese companies operating overseas paid a total of more than $22 billion in taxes to the host countries.

While some Western politicians often raise fears about Chinese investment stealing jobs, statistics and studies showed a totally different picture.

According to China's official statistics, by the end of 2011, the total number of the employees working in overseas Chinese enterprises was 1.22 million, 888,000 of them were foreign workers, and 100,000 were from developed countries.

In 2011 alone, Chinese companies operating overseas hired as many as 1.2 million people, the statistics showed.

Chinese lighting giant NVC has a fully owned subsidiary in the United Kingdom. Out of the 80-plus employees at its Birmingham factory, only three are Chinese, whose main job is to liaise with NVC's China factory on the dispatch of product orders, said Gerry Pass, director of NVC UK.

A report issued in October by Rhodium Group, a New York-based consultancy that analyzes global trends, showed that "the 600 Chinese direct investment transactions made between 2000 and 2012 support 27,000 jobs in the US today."

"Chinese investment helps create new jobs in a much more profound way than the US official statistics show," said Daniel Rosen, cofounder of Rhodium. "At least 30,000 people have benefited from new posts set up by Chinese companies in the country. That figure is five times higher than records from US government agencies."

The study also found that more than $3.5 billion worth of greenfield investment, or investment in new facilities, has added 8,000 US jobs since 2000.

Rhodium predicted that, by 2020, there would be 300,000 Americans on the payroll of Chinese companies' US affiliates should the United States could attract between $150 billion of Chinese outbound investment.

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