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Multinational companies favor China most

(People's Daily Online)
Updated: 2009-09-18 17:49

United Nations Conference on Trade and Development (UNCTAD) released World Investment Report 2009 on Sept 17, pointing out that under the current international economic and financial crisis, in the first half of 2009; global FDI is expected to fall 40 percent. In the long run, multinational companies are still optimistic about China and take it as the world's most attractive place for investment.

At the same time, China has successfully become a strong force in overseas investment. While the global foreign direct investment fell 13.5 percent, China's overseas investment increased by 111 percent, reaching $55.9 billion and China's ratio of overseas investment and foreign capital has risen to 1:2.

James X. Zhan, Director of Investment and Enterprise Division at United Nations Conference on Trade and Development, says a series of new measures launched by China to attract foreign investment prove to be effective, but China still faces challenges from the high-end and low-end markets.

In the low-end market, labor-intensive industries in China which attract foreign investment are facing challenges from neighboring countries. In the high-end market, China is not competitive enough to compete with developed countries, and multinational companies are rushing to put their R&D department back to their countries.

UNCTAD reminds China while China upgrades its industry by using foreign capital, and hopes to attract foreign investment in high-end area, China must also see the important role low-end investment plays in job creation. The current global financial crisis may be turning into the global employment crisis, and governments should pay attention to policy choices.

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While the global FDI continues to decline, FDI in the agricultural investment sector is soaring, thus the subtitle of World Investment Report 2009 is "multinational corporations, agricultural production and development."

The report notes that on the whole, the total foreign capital invested in agriculture is relatively low at present but grows rapidly. Multinational corporations involves in agriculture not only through foreign direct investment, non-equity forms such as contract farming become a major way.

As investment and trade protectionism is rising worldwide, this Monday, UNCTAD gives the G20 report on investment and trade protectionism. The report notes that while protectionism has not yet become global trend, recent cases such as the China-US tire tariff are signs we should keep an eye on.

According to reports, after the global financial crisis, there are sign of murky protectionism in the world. The programs introduced in many countries to stimulate the economy suddenly became breeding ground for trade protectionism. “In 2008, among investment policies introduced around the world, restrictions on investment have accounted for 23 percent, while in 1990s, only 5 percent to 6 percent of restrictive investment policies were introduced each year." Zhan said.

It is reported that the G20 summit's commitment to resist protectionism only lasts until the end of 2010, and at present the United Nations are calling for postpone the deadline.