Investment environment going worse?

Market watch: FDI strategies target ‘green’ investment

By Huang Daohen

Has the country’s investment environment deteriorated? Zhao Xiao, an economics professor at the University of Science and Technology Beijing, said he prefers to trust data more than speculation.

Zhao said that while many foreign companies say the investment environment is worsening, “the statistics tell a different story.”

According to a report by the United Nations Conference on Trade and Development, China remained a paradise for FDI (foreign direct investments) last year as the world economy was dogged by financial crisis.

Worldwide FDI fell 39 percent last year, according to the UN report. The European Union’s FDI dipped 29 percent and the US’ by 57 percent.

The situation in China was a sharp contrast. Last year, FDI in China dropped less than 3 percent, and since last August it has maintained positive growth, the report said.

In June, FDI leaped to more than 39.6 percent of June 2009 levels, Xinhua reported.

“It indicates that China’s [success as an] investment environment is well recognized by foreign enterprises,” Zhao said. “You wouldn’t pour money into a country where the environment is worsening.”

Zhao said it was understandable that there would be complaints about changes in the country’s FDI strategy.

Previously, especially when the country opened up in the early 1980s, China wooed foreign investment and was in desperate need of capital, technology and management.

However, that is no longer the case with the country’s enormous reserves of foreign currency, Zhao said. What the country needs is technology and management – especially those related to clean energy, sustainable development and pollution control.

“The problem China faces now is attracting the right FDI,” Zhao said. The government’s recent strategies for FDI focus on environmentally sustainable, energy efficient and technologically advanced industries.

Referring to complaints about the investment environment, Zhao said future improvements will depend on China’s ability to be sincere in its dealings with foreign enterprises, and on the enterprises’ ability to understand and respect China.

“Respecting the laws, customs and culture [of the country] should be a basic business ethic for any foreign enterprise,” Zhao said.