外国直接投资在中国(1)hkin.pptx

Foreign Direct Investment in ChinaSeth Cox3 March 2005Foreign Direct Investment(FDI)When is investment best defined as direct?When investment gives rise to foreign When investment gives rise to foreign control of domestic assetscontrol of domestic assetsIMF-“made to acquire a lasting IMF-“made to acquire a lasting interest in an enterprise where the interest in an enterprise where the investor has an effective voice in the investor has an effective voice in the mamagment of the company”mamagment of the company”Foreign Direct Investment(FDI)Investment threshold set at state levelInvestment threshold set at state level US:direct when stake exceeds 10%US:direct when stake exceeds 10%China(PRC):when stake exceeds 25%China(PRC):when stake exceeds 25%Higher level to encourage larger investment?Higher level to encourage larger investment?Terms:Terms:Inflow-quantity of FDI flowing into state over Inflow-quantity of FDI flowing into state over a given time period-dynamic measurea given time period-dynamic measure Stock:total accumulation of investment at a Stock:total accumulation of investment at a given point in time-static measuregiven point in time-static measureFDI-What Does it Offer?1.Capital-long-term,risky investmentCapital-long-term,risky investment2.Market Access-export marketsMarket Access-export markets3.Promote Export-led strategies of growthPromote Export-led strategies of growth4.EmploymentEmployment5.Technology-transfers increase Technology-transfers increase productivityproductivity6.Spillovers and Linkages-introduction of Spillovers and Linkages-introduction of more competitive environment and more competitive environment and connections to local industry boost connections to local industry boost productivity and output of entire productivity and output of entire economyeconomyWhat has FDI Done for China?Role in Economic Transformation-GeneralRole in Economic Transformation-General Established new industrial branchesEstablished new industrial branches Employment opportunitiesEmployment opportunities Technological transfersTechnological transfers Technological and Managerial SkillsTechnological and Managerial SkillsSpillovers to domestic industrySpillovers to domestic industry International Trade-boosted immenselyInternational Trade-boosted immenselyExport production by Foreign-Invested EnterprisesExport production by Foreign-Invested Enterprises Increased from 1%in 85 to 45%in 98Increased from 1%in 85 to 45%in 98FIE-Led Export GrowthSource:Lardy(1999)Source:Lardy(1999)#Approved#Approved ApplicationsApplicationsApproved Approved InflowInflowActual InflowActual Inflow1979-19821979-19829229226.016.011.171.17198319834704701.731.730.640.6419841984185618562.652.651.261.2619851985307330735.935.931.661.6619861986149814982.832.831.871.8719871987223322333.713.712.312.3119881988594559455.35.33.193.1919891989577957795.65.63.393.3919901990727372736.66.63.493.4919911991129781297811.9811.984.374.3719921992487644876458.1258.1211.0111.01199319938343783437111.44111.4427.5227.5219941994475494754982.6882.6833.7733.7719951995370113701191.2891.2837.5237.5219961996245562455673.2873.2841.7341.73199719972100121001515145.2645.26Sources:Sources:(State Statistical Bureau 1998),p.138(State Statistical Bureau 1998),p.138.The FDI Boom in ChinaIn 2002 China was the#1 recipient of FDI In 2002 China was the#1 recipient of FDI worldwideworldwideRapid FDI growth began in early 1990sRapid FDI growth began in early 1990s 1979-1992 FDI inflow of 20.2 billion USD1979-1992 FDI inflow of 20.2 billion USD 1997 stock stood at 196.8 billion USD1997 stock stood at 196.8 billion USD5 year inflow of 176.6 billion USD-accounts for 5 year inflow of 176.6 billion USD-accounts for 89%89%stock!stock!Compound annual growth rate of FDI Compound annual growth rate of FDI 44%44%from 1992-1997from 1992-1997GNP-FDI rose from 2%in 92 to 5%in GNP-FDI rose from 2%in 92 to 5%in 9797 FDI in S.Korea early 90s at.02%GNPFDI in S.Korea early 90s at.02%GNPWhat happened in the early 1990s-What happened in the early 1990s-specifically 1992?specifically 1992?The FDI Boom in ChinaSource:Source:China Business Review China Business Review(Nov.-Dec.2000)(Nov.-Dec.2000)-Investment booms in the early 1990s then-Investment booms in the early 1990s then retracts in the wake of the Asian financial crisisretracts in the wake of the Asian financial crisisWhat Accounts for the Boom?Explicit Chinese policy premium on Explicit Chinese policy premium on ForeignForeign capital-Why?capital-Why?Traditional Motivations-conventional gains Traditional Motivations-conventional gains Productivity Improvements-significant spillovers and Productivity Improvements-significant spillovers and linkages-more competitive environmentlinkages-more competitive environmentFIEs almost twice as profitable as SOEsFIEs almost twice as profitable as SOEs 43,542 Industrial FIEs w/profit of 40.79 billion USD43,542 Industrial FIEs w/profit of 40.79 billion USD 86,982 SOEs with a profit of 41.26 billion USD86,982 SOEs with a profit of 41.26 billion USD Average difference in profit of$462,445Average difference in profit of$462,445Yet,no extraordinary policy shifts in 1991-92Yet,no extraordinary policy shifts in 1991-92What Accounts for the Boom?Policy MotivationsSavings-Investment Gap-Savings-Investment Gap-Countries need to subsidize industrialization,yet Countries need to subsidize industrialization,yet lack foreign exchange-Doesnt hold for PRClack foreign exchange-Doesnt hold for PRC Savings Rate-higher 40.6%during boom yrs.Savings Rate-higher 40.6%during boom yrs.Lower from 1986-92 36%Lower from 1986-92 36%Saved more with more capital present?Saved more with more capital present?PRC as a Capital PRC as a Capital ExporterExporter?(1998-WSJ)?(1998-WSJ)PRC has 40%of reserves invested in US treasury bonds PRC has 40%of reserves invested in US treasury bonds(=56bn)(=56bn)In 1998 exported approx.16 billion USDIn 1998 exported approx.16 billion USD*In either case,the PRC had no chronic shortage of In either case,the PRC had no chronic shortage of domesticdomestic capital at the time of the FDI boom capital at the time of the FDI boom*Yet,explicit policy premium on Yet,explicit policy premium on foreignforeign capital capitalThe Preference for Foreign CapitalObvious benefits from conventional FDI Obvious benefits from conventional FDI wisdom-transfers,spillovers and linkageswisdom-transfers,spillovers and linkages*Benefits Benefits must must outweigh costs of courting FDIoutweigh costs of courting FDIThere are consequences of the policy There are consequences of the policy preferencepreference Round-Trip FDIRound-Trip FDI-Domestic capital exported-Domestic capital exported to acquire a foreign“domicile,”re-imported to to acquire a foreign“domicile,”re-imported to establish an FIE-No net capital gainestablish an FIE-No net capital gainEstimated 25%total FDI by the World BankEstimated 25%total FDI by the World BankProblems of the Investment EnvironmentRegional ProtectionismRegional Protectionism-comparable to-comparable to regional ISI strategiesregional ISI strategies To obtain market access,must produce w/i regionTo obtain market access,must produce w/i region Huge returns from producing within protective wallHuge returns from producing within protective wallLimited competitionLimited competition Also leads to similar predatory behavior&rent-Also leads to similar predatory behavior&rent-seeking seeking Benefit:Regional competition to lure FDI will lead Benefit:Regional competition to lure FDI will lead to erosion of barriers to FDI at national levelto erosion of barriers to FDI at national levelRoom for ImprovementDespite huge FDI stock,PRC still far below Despite huge FDI stock,PRC still far below other other developingdeveloping states in FDI per capita states in FDI per capita measurementsmeasurements In 2000:Brazil received$195 per capitaIn 2000:Brazil received$195 per capita China got only$30 per head-15%Brazils China got only$30 per head-15%Brazils OECD states-highly developed-avg.$1,320.9OECD states-highly developed-avg.$1,320.9 Closest developing state is S.Africa$22.2Closest developing state is S.Africa$22.2 Next highest per capita ratio$54-ThailandNext highest per capita ratio$54-Thailand*China still has far to go before achieving a China still has far to go before achieving a developed statusdeveloped statusAttracting High-Quality FDIHigh-Quality?Investment in long-term,capital-intensive projects in high-tech sectorsMajority of FDI in manufacturing Majority of FDI in manufacturing sectors(63%)sectors(63%)Heavily focused on light&intermed.Heavily focused on light&intermed.manufacturesmanufacturesThe time will come to outsource these jobs The time will come to outsource these jobs and move up the production ladderand move up the production ladder Just as S.Korea did(Nike)Just as S.Korea did(Nike)For now,China is the manufacturer to Asia For now,China is the manufacturer to Asia FDIinChinabySector,1999FDIinChinabySector,1999SectorSectorProjecProjectstsAmountAmountContraContractedctedAmountAmountUtilizedUtilized($million)($million)Farming,Forestry,LivestockFarming,FishingFarming,Forestry,LivestockFarming,Fishing7627621,471.701,471.70710.15710.15MiningMining130130322.21322.21557.14557.14ManufacturingManufacturing12,04212,04225,331.8025,331.8022,603.3422,603.34TextilesTextiles5355351,198.521,198.521,370.891,370.89ChemicalsChemicals8678671,758.741,758.741,919.281,919.28PharmaceuticalsPharmaceuticals198198692.62692.62684.41684.41OrdinaryMachineryOrdinaryMachinery485485904.47904.47976.69976.69SpecialEquipmentSpecialEquipment500500743.33743.33509.95509.95ElectronicandElectronicand9229223,942.713,942.713,145.723,145.72TelecommunicationsEquipmentTelecommunicationsEquipmentPower,Gas,andWaterProductionandSupplyPower,Gas,andWaterProductionandSupply1161161,635.191,635.193,702.743,702.74ConstructionConstruction2472471,096.191,096.19916.58916.58GeologicalProspectingandWaterConservancyGeologicalProspectingandWaterConservancy101053.9753.974.524.52Transportation,Storage,andPostandTransportation,Storage,andPostandTelecommunicationsServicesTelecommunicationsServices2052051,114.011,114.011,551.141,551.14Wholesale,Retail,andFood-relatedWholesale,Retail,andFood-relatedServicesServices8258251,204.131,204.13965.13965.13FinanceandInsuranceFinanceandInsurance3 337.0837.0897.6797.67RealEstateRealEstate6696694,177.854,177.855,588.315,588.31SocialServices(includingHotels)SocialServices(includingHotels)1,4741,4743,016.803,016.802,550.662,550.66Healthcare,Sports,andSocialWelfareHealthcare,Sports,andSocialWelfare282867.2767.27147.69147.69Education,Culture,andtheArtsEducation,Culture,andtheArts292960.7260.7260.7260.72ScientificResearchServicesScientificResearchServices6262133.72133.72110.13110.13OthersOthers3163161,488.521,488.52752.68752.68TotalTotal16,9116,918 841,223.0241,223.0240,318.7140,318.71NOTENOTE:Totals may not add up because of rounding.:Totals may not add up because of rounding.SourcesSources:PRC National Bureau of Statistics,China Monthly Statistics,China:PRC National Bureau of Statistics,China Monthly Statistics,China Statistical Yearbook,2000;Ministry of Foreign Trade and Economic CooperationStatistical Yearbook,2000;Ministry of Foreign Trade and Economic CooperationFDIinChinabySector,1999Attracting High-Quality FDIWays to attract higher-quality FDIWays to attract higher-quality FDI1)1)Construct a predictable policy regime-Construct a predictable policy regime-overcome weaknesses of regulatory overcome weaknesses of regulatory frameworkframeworka)a)Investors desire stability more than incentivesInvestors desire stability more than incentives2)2)Legal System-ambiguous and ineffectualLegal System-ambiguous and ineffectuala)a)Better trained lawyersBetter trained lawyersb)b)Courts free of politicizationCourts free of politicizationc)c)Impartial and consistent application and Impartial and consistent application and enforcement of(existing)regulatory law,esp.IPRenforcement of(existing)regulatory law,esp.IPRd)d)Enforce rule of law consistently and broadlyEnforce rule of law consistently and broadlyAttracting High-Quality FDI(cont.)3.Centralize economic policy-making Centralize economic policy-making process-end market segmentationprocess-end market segmentationa)a)Financial market inefficiency one source-Financial market inefficiency one source-distribute capital on regional linesdistribute capital on regional linesb)b)Regional directors autonomous power Regional directors autonomous power another sourceanother source4.Simplify Catalog Regime-part of policySimplify Catalog Regime-part of policya)a)Remove classifications of“Restricted”and Remove classifications of“Restricted”and“Permitted”so all investment is categorized“Permitted”so all investment is categorized as either“Prohibited”or“Encouraged”-reduce as either“Prohibited”or“Encouraged”-reduce ambiguityambiguityAttracting High-Quality FDI(cont.)5.5.Streamline approval process for FDIStreamline approval process for FDIa)a)Spread the“one-stop”shop idea widerSpread the“one-stop”shop idea wider6.6.Untapped Potential-OECD states account for Untapped Potential-OECD states account for about 90%of total world FDIabout 90%of total world FDIa)a)Much of this in the form of mergers and acquisitions Much of this in the form of mergers and acquisitions(M/A)(M/A)b)b)M/A negligible portion of Chinese FDI-partially due M/A negligible portion of Chinese FDI-partially due market segmentation and local protectionismmarket segmentation and local protectionism7.7.Competition Policy-Finish off the SOEs,only Competition Policy-Finish off the SOEs,only the largest remainthe largest remaina)a)Will bolster competitive operating environment as a Will bolster competitive operating environment as a whole,shifting all enterprise to a hard-budget whole,shifting all enterprise to a hard-budget constraintconstraint