Investment spurt poses no threat
By Jiang Wei and Zhang Jin (China Daily)
Updated: 2004-12-04 08:48

Scholars and economists said on Friday the foreign direct investment (FDI) surge in China will not divert the investment that flows to Latin America and Southeast Asia.

China, Latin America and Southeast Asia are the world's three big magnets for cross-border investments.

Latin American countries will not suffer an FDI slowdown because of Chinese competition, said Kwok Chiu Fung, a professor at University of California.

He made the remarks at the 2004 Latin America-Caribbean and Asia-Pacific Economics and Business Association's annual conference held yesterday in Beijing.

The professor said that the increase of FDI in China will also buoy the investment in its southeastern neighbours, which export raw materials and other related products to China.

Fung conducted surveys on the FDI in China and South Asian countries between 1985 to 2002. He also compared China's statistics with those of 16 Latin American countries from 1990 to 2002.

He said that as FDI in China rose beginning in the 1990s, investment in South Asia saw no abating.

China's FDI mainly comes from overseas Chinese investors, and 60 per cent of the investment comes from or via Hong Kong. However, Latin America largely lures investment from the United States and Europe.

He said no evidence has shown that the emergence of China blocked the growth of Latin America.

Aliacia Garcia-Herrero, an economist from Bank of Spain specializing in Latin American economic studies, echoed Fung's comments by saying that China's ability to attract FDI did not generally affect Latin American nations.

"This is not a one-win-one-lose game but a win-win case," Fung said.

These ideas may help calm down the so-called "China Threat," a saying that is popular in some Latin American countries.

There has been overwhelming fear of China's emergence because some Latin American countries share a similar economic structure with China.

Some officials and entrepreneurs of these countries are afraid that foreign investment will flow from Latin America into China.

Instead of competing with each other, mutual investment between China and Latin America has been surging in recent years.

About 36.5 per cent of China's outward investments in 2003 flowed into Latin America, which amounted to US$1.04 billion.

Most of the money went into such sectors as retail, manufacturing and mining.

Chinese investment in the continent is expected to grow at a brisk pace in the coming years.

During President Hu Jintao's Latin America visit last month, China vowed to invest US$20 billion in Argentina in the coming 10 years.

A batch of big Chinese companies such as China Mineral and Metal Corporation, China Ocean Shipping Company, Sinochem and Huawei Technology have shown interest to invest or re-invest in Latin American countries such as Brazil, Chile and Mexico.

The spending spree came as the bilateral trade became prosperous and boosts enterprises' confidence.

The two-way trade surged by some 50 per cent year on year to top US$26.8 billion in 2003.

It also came as China and a number of Latin American nations have vowed to facilitate investment by establishing free trade agreement (FTA) or FTA-analogues.

Meanwhile, Latin American enterprises also eye a growing and increasingly open China, planning to accelerate their presence in this potential market.

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