Foreign Firms to Take Lead in InvestmentWholly owned foreign companies rather than joint ventures look set to account for most foreign investment in China's machinery industry in the next few years, according to Sun Chao, an official with the State Machine-building Industry Bureau research institute.These firms made up 40 per cent of foreign investment in the machinery industry up until 1998, official statistics show. But this proportion is expected to gradually rise after China's entry into the World Trade Organization (WTO). "Wholly owned foreign companies are likely to have a bigger proportion of foreign investment in the machine building industry compared to Sino-foreign co-operative companies in the next few years," said Sun. Foreign companies would rather go it alone than join with Chinese firms in order to avoid possible trouble between old and new ways of business, he said. This friction can sometimes outweigh the potential benefits of investing in China's machinery industry. "Unless they are forbidden to enter the industry without collaboration with Chinese companies, foreign companies will choose to set up wholly owned companies," said Sun Chao. At present, China has few limitations on investment from foreign companies in this sector. Sun added he did not expect big increases in the amount of foreign investment in China's machinery industry in the short term, even after the country enters the WTO. Foreign investment in the industry has peaked and foreign companies, after a heated round of investment, may need to take time to review their losses and gains before investing more, said Sun. The industry had attracted US$34.5 billion in foreign capital up to the end of last year. Foreign-funded companies account for 30 per cent of the machinery industry's total sales at present, according to official statistics. Sun was speaking at the ninth co-operation conference for the Chinese and South Korean machinery industries yesterday. The conference is an annual event organized by the machinery sub-council of the China Council for the Promotion of International Trade and the South Korea Association of Machinery Industry. About 50 Chinese companies and 20 South Korean companies held talks over possible co-operation opportunities Friday. After the conference, many South Korean companies will go on to look for investment opportunities in Hangzhou and Qingdao, according to event organizers. South Korean companies have been very active in investing in China's machinery industry, said Su Bo, vice-director of the Development Planning Department of the State Machine-building Industry Bureau. South Korea became the second largest investor in this sector in 1996 with funding of US$1.02 billion that year. Japan invested most with US$1.14 billion, official statistics show. South Korean investment in China's machinery industry is concentrated in the auto sector, said Su. |
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