Investment Performance News
- Investment focus shifts from made to sold in China
Date: 7-Feb-2007 Sources: (Shenzhen Daily)
In the six years from 2001, China attracted 345.6 billion U.S. dollars in foreign investment more than the 323.3 billion dollars that poured in over the nine years from 1992 to 2000.
While the figures speak for themselves in terms of China's appeal to foreign investors, an underlying trend is that investment from multinationals in the world's fastest growing economy is shifting from 'made in China' to 'sold in China'.
In the period from 1978 to 1991, foreign investors tested the water mainly through joint ventures like those between Chinese and Japanese electronics firms and the HP deal in 1985.
But Deng Xiaoping's visit to southern China in early 1992 reassured foreign investors about the investment environment and multinationals began taking the lead in joint ventures. China and its plentiful supply of labor became a key factor for many multinationals to win in global competition.
Since China's entry to the World Trade Organization in December 2001 it has opened its domestic market in line with its commitment and gained access to international markets.
While the country still remains the key link in the global supply chain to leaders like GE, Ericsson and Samsung Electronics, these firms have begun to take a serious look at China as a market.
China has been trying to stimulate domestic consumption. With a gross domestic product of 20.94 trillion yuan in 2006, the country presents a golden opportunity for many multinationals. GE alone is aiming for 700 dollars to 800 million dollars of sales from Beijing Olympic Games projects.
But the emergence of an affluent consumer population is also luring foreign investors. US consultancy A.T. Kearney predicts that by 2020, there will be an additional 1 billion people in the world with annual purchasing power of 10,000 and 620 million dollars of those will come from China.
Multinationals will make more frequent mergers and acquisitions (M&As) to obtain local understanding of the domestic market, its products and a widespread distribution network.
French giant Schneider Electric's joint venture with Chinese firm Delixi Group in December and ongoing talks by private equity firm Carlyle Group for a stake in construction equipment maker Xugong both highlight the eagerness of foreign investors to get into the domestic market.
Consumers will be the new focus for multinationals, leading to more M&As in the retail, distribution and logistics sectors.
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