Download China Going Global Policy-

From “Going Out” to “Going
Global”
——Past and Future of China’s
Overseas Investment Policy
Dr. Ma Xiaoye, PhD. Economist
Academy for World Watch, Shanghai
[email protected]
Introduction
Overheated report
coverage
Diplomatic policy?
Facts and
interpretation are
confusing
Everybody
Knows
with
wild
imagination
…
1. Relevant researches
Reports by international organizations
Policy statement by Chinese government
M&A events reports
Data “digging”--BOP v.s. Approval
2. Confusing Data
& Concept
Flow & stock (annul & cumulative)
Data using “balance of payment”
statistics
IMF, OECD, UNCTAD
Moftec-Ministry of commerce data
Demarcation:2002 onwards
Problem of present statistics
Statistics by region-Hong Kong puzzle
3. Policy formation
& background
Background of outflow
fluctuations
Preferential loan to foreign trade company before 1994
Loan quota to foreign trade unchanged before 1997,
even when fighting against inflation
Dual exchange rate and exchange quota
Incentives encouraging round trip investment: tax
benefit and approval conveniences
“Going out”-- OPA of redundant capacity, starting 1997
World economic recession
WTO background: competing abroad
Domestic market saturation
Capital scarcity in relative term, even nowadays.
Self-reliance—world market is supplement to domestic market
Foreign currency concern.
Inherited governance problem of SOEs
Poor performance—1/3 profitable enterprises, 2/3 running loses
Over-sensitivity on China’s going global policy externally
3, Where are we standing?
End of 2004
$37billion
accumulated;
Project
completed,
$114.03billion;
Contracted project value,$156.29billion;
Labor cooperation, $30.82billion;
Contracted labor value, $36.11bilion.
Labor work abroad, 3.193million person.
Contracted project breakdown: Real estate: 31%;
Transportation: 17%; Petrol-chemical: 10%;p
Telecom: 10%; Power: 9%; Manufactures: 9%.
Increase over year 2003:
Number of project: 62.5%;
Contract value: 77.8%
Average investment value per project: 9.5%
Distribution by industry sectors:
Mining, $1.91billion, 52.8% of total;
Commercial service, $0.96billion, 26.5% of total;
Manufacture, $490million, 13.2% of total;
Wholesale and retailing, $110million, 3%;
Others, $150million, 4.2% of total.
3 years since WTO accession
2002
2003
2004
$2.7billion
$2.85billion
$3.62billion
Increase by 5.5%
Increase by 27%
4, Enforceable policy measures—status quo
“16th party congress” decision:Attract-in and going-out are equal
important
“Decision on reform of investment regime” 2003
Pending “Administrative regulation”
Risk assessment for approval—11 items reduced to 5
Currency purchase quota—reviewed case by case
Deposit for profit rebate—eliminated
2001 onward
Decentralized 3.3 billion foreign currency purchase quota
approval for investing abroad
Self earned foreign currency—subject to approval
Domestic foreign currency loan—subject to scrutiny
Increase of investment amount (equity)—same as above approval
Not possible to get cash
New approval procedure starting Oct 2004
•Scope: Oversees assets and management right acquired through
exchange of cash, securities, materials, IPR, technology, stock,
bond or guarantee.
•Approval authorization on intended investment projects
(Resources)
State council: $200million
State commission of development and reform: $30million upwards
Local commission of development and reform: Below $30million
•SOEs directly under control of central government may make
investment decision on its own and report afterwards, subject to a
ceiling of $30million.
•Verification
Any change of the investment up to 20% of the original amount
will be subject to re-approval.
Foreign currency purchase approval agencies
$50million and above-- state council.
$10million and above--state commission of development and reform.
Any amount bellows $10million--provincial commission of
development and reform.
Layers of approval by administration
SOEs directly under control of central government ＞ state
commission of development and reform ＞state council.
Other enterprises ＞ provincial commission of development and
reform＞state commission of development and reform＞state council.
Time needed for approval
State commission of development and reform, 20-30 days.
Other government institutions concerned, 7 days.
7 days prior report required for bidding abroad.
Fore front guarantee also subject to approval.
--Resources scarcity
--Over capacity of manufacture
--Unreleased domestic consumption power, especially in rural area
--Insufficient R&D input at all level—0.75%
--Protectionist challenge
--Processing center instead of manufacture center
Still some way to go as a policy with enforcement measures
Positive factors:
112 bilateral investment protection agreements
87 agreements on avoiding double taxation
MOU on labor cooperation
Arrangement on social securities
Negative factors:
No investment law
Yet to open capital account
Currency control
Bank loans availability
Investment insurance
5, Some phenomena
Not many case show vertical value chain
extending like logistics & after sale services
(12.6% in 2003)
Manufactures mainly are household electronic
applicants
Resources (48.2% in 2003)
Few R&D investment
Geographic distribution is changing positively
(Asia attracts 80%)
Greenfield investment are mainly assembling
operation
SOEs account for 43% in 2003
6, Will China pour money globally?
Ministry of finance and PBOC concern
SOE governance
Per capita capital formation constraint
Less developed economy in term of GDP
Urbanization and employment challenge
Corruption sensitiveness
“Two ends” abroad
Currency appreciation incentive
Domestic market saturation