Promising outlook on US, China investment

The United States and China - the world's two largest economies - are competing in different foreign direct investment indices, with the former showing its ongoing economic recovery and the latter strengthening its role among emerging economies.

China moved up from sixth to third place in 2012 in terms of outward foreign direct

investment - after the US and Japan - while a recent survey listed the world's second-largest economy as "the most promising source" of FDI, according to an annual report of the United Nations Conference on Trade and Development.

In 2012, FDI outI ow from China continued to grow, reaching a record $84 billion, while total outward FDI from East and Southeast Asia rose 1 percent to $275 billion, amid a sharp decline in global FDI outI ows, the report said.

China's outbound direct investment into non-@ nancial sectors increased 20 percent year-on-year to $34.3 billion in the first five months of the year, while spending surged 28.6 percent year-on-year to $77.2 billion in 2012, according to the Ministry of Commerce.

"China's outward direct investment grew at a striking pace," said James Zhan, director of the investment and enterprise division of the UNCTAD. "Driven by multiple goals of exploring markets, enhancing corporate performance, acquiring natural resources and strategic assets, Chinese companies made very broad outward investments in diB erent sectors and regions. It's worth noting that Chinese investment in the overseas infrastructure sector increased very fast."

FDI from China set a record in the US in 2012, with completed deals worth $6.5 billion, a 17 percent increase from the previous record of $5.5 billion in 2010, according to New York-based Rhodium Group, which tracks overseas Chinese investment.

The most alluring sectors in the US were oil and gas extraction, advanced manufacturing operations - that helped Chinese firms move up the value chain - and assets that allowed investors to store value and gain stable returns such as utilities, real estate or hospitality, said the group.

Liang Guoyong, an economic affairs officer at the UNCTAD's investment and enterprise division, said that Chinese companies have become the targets of investment protectionism due to their fastgrowing overseas investments, as well as the broad scope of their spending.

"The motivation of getting natural resources and strategic assets, including technologies and brands, easily left Chinese companies as the targets of protectionism, as China, at present, tends to invest in Europe and the US for advanced technology and brands," Liang said.

"Mergers and acquisitions in the process often arouse employment concerns in the host countries. State-owned enterprises - the major drivers of China's outbound investment - were often easily targeted, which also accounted for the rising protectionism against China."

The US jumped from fourth place to the top - with China and Brazil taking second and third spots - last year for the 1 rst time since 2001, according to the 2013 Foreign Direct Investment Confidence Index by global consulting 1 rm A.T. Kearney.

The survey of more than 300 executives from 28 countries was conducted between October and November of last year and highlighted executives' views that US workers are becoming more competitive.

"While investors are still in a holding pattern as they have been since the recession, they seem more optimistic and less jittery than they have in recent years," said Paul Laudicina, chairman emeritus of A.T. Kearney in a company press release.

"There's been a leveling effect this year between developed economies and developing nations in terms of foreign investment. The world seems to be slowly 1 nding its footing," said Laudicina.

Most respondents of the survey said that the outlook for emerging markets is "rosiest", with 78 percent expecting growth in some form.

"Rather than a temporary safe haven during economic upheaval, emerging markets are developing into a complement, instead of an alternative, to the developed world," said Erik Peterson, managing director of A.T. Kearney's Global Business Policy Council.

The UNCTAD report shows that FDI inflows to China declined 2 percent year-on-year to $121 billion in 2012, second only to the US, while China remains the top investment destination for transnational corporations in the medium term.

FDI in China's non-1 nancial sectors declined 3.7 percent year-on-year to $111.72 billion in 2012, according to the Ministry of Commerce, while the 1 rst 1 ve months of the year saw FDI inflow in China edging up 1.03 percent year-on-year to $47.6 billion.

"The structure of FDI inI ow to China has changed following the country's economic restructuring and industrial upgrading," Zhan said. "Owing to rising costs in the eastern region, some investment and production activities are being transferred into inland areas and the share of the central and western regions in China's total FDI inI ow rose from 12 percent in 2008 to 17 percent in 2012."

He added that some lowend manufacturing plants are moving to Southeast Asian countries with lower costs than China, while FDI inflow to China's high-tech and advanced manufacturing sectors is increasing rapidly.

"The total number of foreign research and development centers in China doubled in the past five years and reached 1,800 at the end of 2012. The quality and structure of China's FDI kept improving," Zhan noted.

Contact the writers at lijiabao@chinadaily.com.cn and yuweizhang@chinadailyusa.com

(China Daily USA 06/27/2013 page1)