Chinese FDI wrongly seen as harbinger of doom

Fear at home plagued China when it first opened its doors to foreign investment decades ago.

Locals were worried that domestic brands would not be able to resist foreign competitors, and that economic security could be jeopardized by foreign control of key industries.

Now the public agrees that opening-up has been indispensable for economic growth and is the best way to strengthen local industries.

The tide has reversed. When Chinese investors started dangling their feet into international seas, they caused fear and suspicion, especially among Western countries.

Two recent examples are Chinese businessman Huang Nubo's $9 million endeavor to purchase 300 square kilometers of land in Iceland. He plans to develop the land into a tourism resort complete with hotel, golf court and horse ranch. Meanwhile, an investor consortium bidding to buy the Los Angeles Dodgers has been met with suspicion due to the reported inclusion of investors linked to the Chinese government.

It seems that Chinese investments abroad are often judged by two types of mindset among other countries. They either fear China's strategically ambitious expansion or they think China is mimicking a Japanese-styled shopping spree seen as a few decades ago.

No matter what the location or industry targeted by the investment are, Chinese investments are often interpreted politically, and seen as disastrous for local business environment. Business sense appears to be a secondary concern.

Despite long being a favorite destination for foreign direct investment, China is a latecomer to the international investment game. China's outbound investment currently accounts for only 5.2 percent of the total global volume. Its accumulated FDI for 2010 ranked 17th in the world. The share of Chinese investment is not in proportion to the ripples it creates.

When an economy weakens, it seems the country at hand will grow more sensitive to inflowing investment despite this being the ideal time to attract foreign investment.

Stereotyped preconceptions may cost mutually beneficial deals, and let economic recovery float further away.