Despite the government’s efforts to cool the economy, FDI in China continues to rise
In 2004, the total number of contracts signed was up 15%
In 2004, the contracted amount of FDI rose 42.7%
Retail investment has increased
Financial Institutions – HSBC Holdings
Foreign Investment in China
Government is trying to spur investment in northeastern & western China
Intel Corp. announced a $375 million chip testing & packaging facility in Chengdu
Other major investors in Western China include:
Ford Motor Co.
High Tech companies are also establishing operations in western China
Origins of FDI in China (2004) $1.89 Billion Taiwan $2.43 Billion United States $2.95 Billion Japan $3.51 Billion South Korea $3.79 Billion British Virgin Islands $10.84 Billion Hong Kong Amount Country of Origin
The following items are prohibited from entering China:
Arms, ammunition, explosives, counterfeit currencies, printed matter, magnetic media, films or photographs that are deemed detrimental to the political, economic, cultural, or moral interests of China, lethal poisons, illicit drugs, disease-carrying animals and plants, foods, medicines, and other articles, and old/used garments
In addition rules went into effect in 1999 that further restrict or prohibit importation of certain commodities related to the processing trade.
China posted a trade deficit for the first time in over a decade in 2004
Overall trade grew roughly 39% in the first half of 2004 – same as in first half of 2003
US-China Trade expanded the largest margin the past decade
Mostly due to jump in exports to U.S.
Grew a record 36%
In 2004, China export mix remained mostly the same except toys failed to make the top 10 export list for the first time in more than 15 years!
China’s Competitive Advantage
Low-skilled, Labor-intensive goods
While China has an increasingly open and competitive economy, substantial barriers have yet to be dismantled!
U.S.– China Trade
In 2003, US/China Trade topped $190 Billion
US Trade Deficit with China totaled $134 Billion
U.S. exports to China are increasing
US has benefited from China’s demand for raw materials
US Cotton exports to China increased over 500%!
US Soybean exports to China rose over 188%!
US/China trade grew more than 30% in first half of 2004
U.S.– China Trade * Figures in $ Billion U.S. Balance: -74.7 -91.3 -90.2 -111.4 -134.9 191.7 155.6 128.6 123.9 100.9 Total 163.3 133.5 109.4 107.6 87.8 U.S. Exports 28.4 22.1 19.2 16.3 13.1 U.S. Imports 2003 2002 2001 2000 1999
Firms --- gain a large export market
Consumers --- opportunity to purchase cheap imports from China
Obtain raw materials to convert into products for export