Friday, 26 October 2012

China's Inward FDI and its Policy Context

My China's Inward FDI and its Policy Context has just been published on the Vale Columbia Center website.


China remains the pre-eminent recipient of inward foreign direct investment (IFDI) among
developing countries. FDI flows to the country continued to rise even during and after the
recent global financial and economic crises, when many multinational enterprises (MNEs)
found themselves in difficulties, demonstrating the continuing popularity of China as an
investment destination. Nonetheless, other developing countries, such as Indonesia and
Vietnam, are starting to steal China’s thunder, offering themselves as cheaper alternatives.

Although FDI stock in China reached a new high of US$ 711 billion in 2011, IFDI attraction
is losing its former high priority in the Government’s arsenal of economic policies, especially
as the focus is turned ever more sharply on promoting outward investment. Now that
domestic enterprises have taken over most of the functions provided by foreign investment in
the first two decades of economic reform (i.e., the 1980s and 1990s), IFDI policies are being
concentrated on honing the investment attraction effort to bring in foreign investments
capable of filling gaps in the country’s industrial structure and helping China meet policy
goals such as environmental protection and energy conservation.

Wednesday, 10 October 2012

Open investment climates and corporate transparency

I haven't read all the documentation yet, so this post is a preliminary statement of general principle, not a detailed analysis of recent announcements in Washington D.C. regarding threats to national security posed by a specific Chinese investment project and two Chinese multinationals.

Wednesday, 3 October 2012

In memoriam Bo Xilai 波袭来回忆录

Not long before I moved to Hong Kong to work in the EIU office there in mid-1996, I was invited to a lunch with a few other economists in the City of London. If I remember correctly, this event was in the Bank of England, the only time I have been admitted to that august institution. The speaker was the Mayor of Dalian, a Mr. Bo Xilai.

Over the years, I had got used to Chinese officials making long speeches on every possible occasion. This time, however, Mr. Bo used a refreshingly different approach. "You don't want to hear me speaking. You want to eat lunch. So let's watch the video." He then clicked on a remote and a very snazzy video sprang to life on the large screen above his head. Instead of the usual zoom from a flower to a landscape accompanied by harp flourishes that was the norm for Chinese investment promotion films in those days, the opening shots were brief diagonal cross-cuts of dancing girls and flashing lights. "Dalian -  Hong Kong of the North" was the title. His business card has vanished into my vast collection, but he certainly made an impression.

From 2002 to 2010 I worked with China's Ministry of Commerce on behalf of the OECD. When Bo Xilai took over the Ministry of Commerce (recently renamed, so with the acronym MOFCOM instead of MOFTEC), I asked people in the know in Beijing what he was like. Depending on how you interpreted the information, he was a tyrant, a breath of fresh air, or both.

Saturday, 22 September 2012

The Alabama connection

Alabama might at first sight seem to be a part of the United States which is not particularly close to China. Big Chinatowns are in San Francisco and New York. Most people in China think the United States consists of New York, Los Angeles and perhaps Texas. So why the current Chinese interest in Alabama?

The reason for the developing economic relationship between China and Alabama (and the rest of the South East US) is the surge in China's outward direct investment. In the 1990s and the early 2000s, manufacturing shifted to China to take advantage of low land and labor costs. In recent years, labor costs have risen dramatically in China and there has been a massive property boom that has pushed up land prices,  while the Chinese yuan has risen over 40% since 2005 after adjusting for inflation, so it is now increasingly profitable to move production to cheaper locations outside China. Land and labor costs are lower in the South East than other parts of the US, attracting Chinese companies more readily than more expensive locations further north.

Although you might not expect rugged individualists in the Deep South to have a similar outlook to the inhabitants of a "communist" country like China, there are similarities in outlook. For example, both communities place a strong value on the family and are noted for their hospitality. Nevertheless, it takes time and effort to develop mutual understanding. The Alabama China Partnership that is fostering the growth of Chinese investment in the state devotes serious attention also to cultural events that can help Chinese and Americans to get to know and understand each other. Both at this week's Economic Summit in Dothan and next week's ACP Fall Symposium in Monroeville, Chinese participants have a chance to taste local culture in the form of a performance of a play based on the novel "To Kill a Mocking Bird" and a loud blues band, Ruffwaters, while Alabamans hear traditional Chinese songs and see sand paintings by a Chinese member of Cirque du Soleil. Sitting next to me as I write this is Hunter Johnson, a composer from California who composes and produces music to accompany the sand painting, working closely with the painter to ensure that the music fits changes in her routine.

Tuesday, 3 July 2012

Indian call center scam: the inside story

Silly me. I answered the phone today and didn't hang up when I heard one of these resourceful rogues telling me that my security had been compromised and that he was from Windows Service Center.

Monday, 2 July 2012

Report on China's solar industry says it is competitive, a program of the Kearny Alliance, states that its mission is to encourage and foster open, honest, fact-based dialogue to promote productive trading relationships. [Neither organization has any business relationship with Chinability or to my consultancy, GrowingCapacity, Inc.] In May 2012 ChinaGlobalTrade published a report entitled China's Solar Industry and the U.S. Anti-Dumping/Anti-Subsidy Trade Case which seems to me to be consistent with this mission statement.

Monday, 11 June 2012

Wednesday, 23 May 2012

Thursday, 22 March 2012

I have set up a consultancy, Growing Capacity, Inc., to promote investment for development worldwide.

Saturday, 3 March 2012

No barriers

This op-ed was the lead in the South China Morning Post's Insight section on February 18, 2012:

Ken Davies says Chinese investment needs to be welcomed,
not feared, by the US and other sputtering economies. 
For their part, Chinese companies must operate more transparently to gain international trust

I squirmed as I listened to US President Barack Obama’s recent state-of-the union address. China got pride of place as a cause of America’s economic woes. He mentioned it four times.

I should have expected that. It’s a presidential election year. Bashing China is now as popular as bashing Japan in days gone by.

Here in New York, people complain about “all the jobs going to China” and Chinese products being rubbish. So blaming China just might help Obama stay in the White House. But does it make economic sense? Not at all. I’ve got news for America and the other countries that see China only as a dangerous competitor, sucking out jobs from their economies and flooding their markets with cheap rubbish.

China is now one of the biggest investors in the world. Its companies are opening factories and buying oil wells. And it’s not all in Africa. More and more is in America. In companies that invent things and create jobs.

Monday, 23 January 2012

              Wishing you all a very Happy New Year of the Dragon!               

 新年快樂!    恭喜發財!