News on Chinese Investment

china-investmentChinese investment in American real estate from 2013 through the end of the first quarter of 2014, totaled close to $6,000,000,000. This indicated that, at some point in the not-too-distant future,  China may make larger investments into the US than Canada and Australia. Back in the 1980s, it was Japan that had this role; it was the Japanese firms peaking US real estate investments.

Moving over to South America, Chile is escalating Chinese investment, especially in the infrastructure and energy industries. Currently Chile exports quite substantially in copper, fruit, wine and seafood. In 2007, China was the largest recipient of Chilean imports. This was likely connected to the fact that two years earlier, a free-trade agreement was signed between China and Chile. As well, over the last couple of years, the average annual growth of import-export and export-import between the two countries reached over 20 percent.

China as a Global Investor

In 2013, Chinese ODI reached $108bn — an increase of 22.8% from 2012. This turned China into one of the largest investors in the world. However, despite this optimistic statistic, many of these investments fail. Indeed, according to Chadbourne & Parke investment consultant Edwin Lee, the figure of failed investments is approximately 30%. This might be because many Chinese businesses require successful interpersonal relationships to be at play – in other words, bribery. And that is not easy for a business to guarantee.

Today’s FDI figures in China are looking good; they have plummeted to a four-year low. But is China responding to this? It seems not. Just a couple of weeks ago, when Lou Jiwei addressed G-20 finance ministers in Australia, he said that his country “will not make major policy adjustments due to changes in any one economic indicator.” China seems to be taking a backseat vis-à-vis its interventionist policies. Independence is all very well, but some experts are warning that it might be too soon for China to go this route. This is indicative of the fact that Jiwei’s comments resulted in the SHCOMP to plummet 1.7 percent overnight, which was a second decline in five trading sessions.

Chinese investments are the way forward in some areas. But Chinese firms need to realize that they are playing in a global arena and act accordingly.