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Foreign Capital Pouring Into China Again

haidian

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2/17/2015 @ 6:13PM 164 views
Foreign Capital Pouring Into China Again -- Wise Investment Or Money Sinking Into A Black Hole?

After a brief pause for a couple of years, foreign capital is pouring into China in early 2015. Foreign direct investment (FDI) in China grew by a whopping 29.4% in January of 2015 from a year earlier to $13.9 billion, according to a Reuters report.

That may come as a surprise to many global observers for two reasons. First, the new FDI comes at a timewhen the Chinese economy is haunted by slowing-down in its export markets and manufacturing, the blowing of real estate bubbles, and growing competition from Japan and Korea.

Second, foreign investors are expanding their presence in China at a time foreign companies face increasingly hostile Chinese government regulators.

To be fair, China is among the few large economies around the world to continue growing, though at lower rates than it used to be. And its enormous population creates a great potential market for foreign investors and marketers, especially in the service sector where most of the new foreign investment is directed. That could explain the big presence of foreign companies like Qualcomm, Yum Brands, McDonalds, and Starbucks—to mention but a few, which derive a good chunk of their sales from the Chinese market.

Still, China is a sort of Semi-Soviet Semi-Latin model in which the government continues to hold its grip on the private and business lives of its people, while it fails to create a fair and transparent business regime that lowers risks and uncertainties for old and new investors.
Worse, foreign enterprises become the target of state-owned media and government regulators and end up changing their business models and paying “ransoms” if they want to continue doing business in China.


Last year, for instance, US skincare and nutrition firm Nu Skin had to pay a monetary fine and change its business practices following an allegation by China’s state media that the company was operating a pyramid scheme. More recently, Qualcomm had to pay a near one billion dollars fine and cut the fees it charges domestic companies to settle government allegations that the company violated China’s antimonopoly law.

And while the settlement solved one part of Qualcomm’s China problem — access to the Chinese market—it isn’t clear that it will solve another part—enforcing contractual agreements with local customers.

The bottom line: Pouring money into China can be a wise decision, provided that you can appropriate a decent return on your investment. Otherwise, it is money disappearing in a black hole.


Foreign Capital Pouring Into China Again -- Wise Investment Or Money Sinking Into A Black Hole? - Forbes
 
Last year, for instance, US skincare and nutrition firm Nu Skin had to pay a monetary fine and change its business practices following an allegation by China’s state media that the company was operating a pyramid scheme. More recently, Qualcomm had to pay a near one billion dollars fine and cut the fees it charges domestic companies to settle government allegations that the company violated China’s antimonopoly law.

And while the settlement solved one part of Qualcomm’s China problem — access to the Chinese market—it isn’t clear that it will solve another part—enforcing contractual agreements with local customers.

US regime media constantly attacks Chinese investment in the US, and when they get a little bit squeezed and held responsible in China, they start crying. In fact, this is called leveling the playing field. These investors are free to pack up and leave as there is enough Chinese (and non-US) capital to fill in the space.

They will not come to China if they do not anticipate a return, hence the black hole analogy is stupid at best.

Qualcomm will pay a billion dollars because it has violated China's laws. This is not an allegation; it is a fact. A fact that is stronger than, say, the US-regime concerted attacks on Japanese car-makers or the fine levied upon Samsung following "allegations" of IP rights violations.
 
US regime media constantly attacks Chinese investment in the US, and when they get a little bit squeezed and held responsible in China, they start crying. In fact, this is called leveling the playing field. These investors are free to pack up and leave as there is enough Chinese (and non-US) capital to fill in the space.

They will not come to China if they do not anticipate a return, hence the black hole analogy is stupid at best.

Qualcomm will pay a billion dollars because it has violated China's laws. This is not an allegation; it is a fact. A fact that is stronger than, say, the US-regime concerted attacks on Japanese car-makers or the fine levied upon Samsung following "allegations" of IP rights violations.

US is throwing its toys out of the pram because more countries are willing to stand up to American thuggery and intimidation.

China is playing hardball with the US with each passing year as Chinese power rises and US influence wanes as it loses monopoly positions in many areas.

American aura of invincibility is being completely annihilated and it's absolutely infuriating the US regime to no end.

China now has a MASSIVE consumer market which Chinese companies and foreign companies can sell to. Domestic consumption is now playing a big role in the Chinese growth.

China has its own domestic brands that can replace American companies in pretty much all industries. China's technological base is quickly advancing and the gap is being closed at a rapid rate.

China is now a net capital exporter with ODI surpassing FDI last year.

China should continue to give the middle finger to the US.
 
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