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CHINA GONE GLOBAL (Part 2)
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  • Reported PRC Aid by Year, 2002-2007 2002 51 2003 1,482 2004 10,485 2005 10,106 2006 27,518 2007 25,098
  • Chinese investment in the US is quite significant, but direct investment is tiny
  • - Chinese FDI marginal share of total inward FDI stock in the US - However, problem with data from BEA for analysis: huge time lag, BOP methodology, doesnt capture flows through offshore financial centers, suppression of data, not all metrics, etc.
  • So what we did: compiled our own dataset: bottom up approach Upsides: Results: Clear inflection in past 2 years: (...)
  • - Other metrics that we present: distribution by state, by ownership!

CHINA GONE GLOBAL (Part 2) CHINA GONE GLOBAL (Part 2) Presentation Transcript

  • China’s worldwide reach: Outward Investment (Heritage )
  • Investment Flows - total $2861 Million- in 2003 In USD million
  • Investment Flows - total $56,529 Million- in 2009 In USD million
  • Investment Flows – not including HK Macau and Taiwan 2003 In USD million
  • Investment Flows – not including HK Macau and Taiwan 2009 In USD million
  • Outward Direct Investment: Flows 2003- 2009 2003 2004 2005 2006 2007 2008 2009 ASEAN 125.7 195.6 157.7 335.8 1033.7 2484.4 2698.1 Central Asia 6.5 18.8 109.5 95.5 384.3 665.5 354.5 Northeast Asia 166.8 109.8 664.8 160.3 310.4 435.4 631.6 South Asia 11.7 4.5 17.1 (50.3) 935.9 494.7 78.8 MEAF 26.9 201.2 297.8 405.9 498.6 203.8 965.6 HK Macau Taiwan 1180.7 2655.0 3428.0 6888.4 13779.6 39283.6 36057.0 Africa 68.3 151.6 200.9 361.5 1297.4 5480.1 1070.5 EU 112.5 73.1 189.5 128.7 1044.1 466.6 2966.4 Russia & Rest of Europe 32.1 79.1 206.0 455.1 489.6 399.8 376.8 Central America & Caribbean 1022.5 1745.2 6484.7 8429.9 4448.1 3497.1 6998.3 South America 15.7 18.9 38.1 63.8 351.7 75.4 329.6 Australia & Oceania 33.9 120.2 202.8 126.4 770.1 1951.9 2480.0 US 65.1 119.9 231.8 198.3 195.7 462.0 908.7 Canada (7.3) 5.1 32.4 34.8 1032.6 7.0 613.1 Total 2861.1 5497.9 12261.2 17634.0 26571.7 55907.2 56529.0
  • ODI STOCK
  • Stock inflow 2003-2009 Top Countries
  • Outward Direct Investment: Stocks in 2003 total 33,222 million USD USD Million
  • Outward Direct Investment: Stocks in 2009 total 245,755 million USD USD Million
  • Outward Direct Investment: Stocks 2003- 2009   2003 2004 2005 2006 2007 2008 2009 ASEAN 587.0 955.8 1,256.3 1,763.8 3,953.6 6,487.4 9,578.9 Central Asia 44.4 78.6 350.1 489.4 934.0 2,017.4 2,343.2 Northeast Asia 339.3 799.1 1,194.6 1,533.4 2,431.7 2,374.2 3,413.8 South Asia 45.7 60.2 255.3 226.5 1,248.8 1,738.3 1,950.9 MEAF 537.4 810.8 1,438.5 2,050.7 2,231.8 2,676.7 3,743.6 HK Macau Taiwan 25,079.1 31,017.7 37,105.8 42,882.6 69,692.1 117,406.2 166,336.3 Africa 462.1 665.4 974.1 1,631.7 3,240.7 6,495.9 7,600.0 EU 421.7 537.4 767.9 1,273.3 2,940.9 3,172.7 6,229.1 Russia & Rest of Europe 65.4 130.7 478.8 952.1 1,463.4 1,884.8 2,360.4 Central America & Caribbean 4,393.8 8,168.4 11,500.9 19,440.0 23,907.3 31,167.8 29,199.4 South America 225.5 285.1 305.9 462.8 899.5 1,073.8 1,572.0 Australia & Oceania 472.3 544.0 650.3 939.5 1,830.4 3,816.0 6,419.0 US 502.3 665.2 822.7 1,237.9 1,880.5 2,389.9 3,338.4 Canada 46.2 58.8 103.3 140.7 1,254.5 1,268.4 1,670.3 Total 33,222.2 44,777.3 57,204.4 75,024.4 117,909.3 183,969.5 245,755.4
  • Stock of outward foreign direct investment
  • Global Outward FDI (2000-2009) total 11.6 trillion USD $174.7 Billion USD Source: UNCTADstat
  • Country Loses Huge From Debt Holdings
    • The depreciation of the US dollar causes China loses $271.1billion on its foreign exchanged reserves accumulated between 2003 and 2010.
    • The amount of loss cannot be offset by the country’s overseas investment earnings. (Zhang Anyuan)
  • CHINESE OVERSEAS LOANS AND ASSISTANCE
  • PRC Aid by Year and Region, 2003-2007 US$ 25,098 million
  • Global Net ODA in 2010 http://webnet.oecd.org/oda2010/
  • Geographical Distribution of China’s Foreign Aid Funds in 2009 By the end of 2009, China provided a total of US $39.47 billion in aid to foreign countries. Source: White Paper on China's foreign aid issued by China's Information Office of the State Council on April 21, 2011
  • CDB’s Energy- Backed Loans, 2005-2010
  • Estimated Oil Deliveries From CDB’s EBLs, 2010-2014
  • CHINA –U.S. ECONOMIC RELATIONS U.S.-CHINA
  • Symbiotic Relationship Between U.S. and China China is the largest foreign holder of US treasury securities, with a $1.2-trillion portfolio. China also has $3 trillion in currency reserves.
  • Trade
  • China’s trade with U.S. 283.679 101.959 2001 China joins the WTO Total trade in 2010: $385.6 billion Exports Imports
  • China’s share of trade in U.S. 2000 vs. 2010 17% 14% 2000 2010 $ 2,723.5 bn $438.3 bn China's surplus $29.8 bn China's surplus $181.7 bn
  • U.S. apparel prices goes where when import prices have risen lately?
  • Chinese Portfolio and Direct Investment in the US, 2009* USD bn, direct holdings only Source: US Treasury, BEA, RHG, *portfolio investment data from mid-year 2009 and FDI data from end-year 2009
  • Value of U.S. imports of wooden bedroom furniture, by import country "To avoid a 2005 U.S. tariff on Chinese-made wooden bedroom furniture, Chinese furniture companies moved operations to other Asian countries, thwarting U.S. efforts to curb “dumping,” the export of goods at unfairly low prices
  • Investment- FDI
  • US Investment Income Payments to China, 1999-2009 USD bn, US BOP flow data Source BEA, RHG
  • US Inward FDI Stock by Region of Origin, 2009 % share of total stock in 2009 ($2.3 trillion), historical cost basis, UBO Source: BEA, RHG
  • The U.S. trade relationship with China Total trade: $365 billion
  • Chinese Direct Investment in the U.S., 2003-2010 USD mn and number of deals
    • Source: RHG
  • China’s Direct investments in the U.S.
  • The China Investment Monitor: 2003
    • Source: RHG
    cim.rhgroup.net
  • The China Investment Monitor: 2003-2005
    • Source: RHG
    cim.rhgroup.net
  • The China Investment Monitor: 2003-2007
    • Source: RHG
    cim.rhgroup.net
  • The China Investment Monitor: 2003-2009
    • Source: RHG
    cim.rhgroup.net
  • The China Investment Monitor: 2003-2010
    • Source: RHG
    cim.rhgroup.net
  • Distribution by State: Top 20 USD mn and number of deals
    • Source: RHG
  • Distribution by Industry USD mn and number of deals
    • Source: RHG
  • Distribution by Ownership USD mn, number of deals, percentage of total
    • Source: RHG, **might include minority stakes by government owned or related entities (<20%).
  • Impacts?
  • FDI from China: Enonomic Benefits and Risks Benefits Risks Macro Effects
    • Efficient global value chains
    • Specialization and economies of scale
    • Increased competition in the market
    • Lower prices for consumers
    • Higher prices for owners of assets
    • Knowledge and other positive spillovers
    • Tariff jumping
    • Re-organized value chains result in loss of high value added activities and jobs
    • Leakage of technology and knowledge
    • Distortion of market prices
    • NIIP / BOP effects
    Local Effects
    • Local investment and tax revenues
    • Employment: new greenfield facilities or revitalized acquisitions
    • Worker training & other positive effects
    • Loss of jobs at firms and suppliers if local operations are closed after acquisition
    • Restructuring lowers job quality
  • U.S. Affiliates of Japanese Firms, 1977-2006* USD mn, thousand people
    • Source: BEA, RHG; *non-bank affiliates only, UBO principle; **data for 2007 available but not directly comparable to older figures.
  • National Security Impacts
    • Potential Benefits:
    • FDI is a deeper form of economic integration, which fosters economic interdependence between nations and can make conflict less likely.
    • Potential Risks:
    • Control over strategic assets such as ports or pipelines.
    • Control over the production of critical defense inputs.
    • Transfer of sensitive technology to a foreign power with hostile intent.
    • Espionage, sabotage and other disruptive action.
    • Does China present special concerns?
    • Economic power: China could pass the United States in one to two decades.
    • China is not an ally and has a stated goal of balancing American hegemony.
    • Extraordinary state ownership and intervention in the Chinese economy.
    • A troubled export controls record, a proliferator of sensitive technologies to rogues.
    • A heightened threat for espionage assessed by the US Government.
  • IV. Doormen: Policy and Politics
  • Acquisitions Covered by CFIUS by Acquiror‘s Home Country Annual number of transactions covered
    • Source: CFIUS Annual Reports to Congress, RHG
  • Controversial Chinese U.S. Investments, 1990-2011 Summary Status 1990
    • China National Aero Tech , acquisition of Mamco Manufacturing
    Blocked by the President 1995
    • CNIEC/Hua San/Sextant , acquisition of Magnequench
    Completed 1999
    • China Ocean Shipping Corporation , port lease, Long Beach
    Blocked by Congress 2005
    • Haier , acquisition of Maytag
    Withdrawn
    • China Offshore Oil Corporation , takeover of Unocal
    Withdrawn
    • Lenovo , acquisition of IBM’s personal computer unit
    Completed 2009
    • Huawei , acquisition of US-based 3Com
    Withdrawn
    • Tengzhong , acquisition of Hummer
    Withdrawn
    • Minsheng Bank , acquisition of UCB
    Blocked by the Fed
    • Northwest Nonferrous Int. Inv. Corp ., acquisition of Firstgold
    Withdrawn 2010
    • Tangshan Caofeidian , acquisition of Emcore
    Withdrawn
    • Anshan , co-investment in a start-up steel plant in Mississippi
    Pending 2011
    • Huawei , acquisition of 3Leaf technology
    Dissolved
    • China Aviation Ind. General Aircraft , acquisition of Cirrus
    Pending
  • Some estimate an increasing stronger economy will enable china to surpass the US in R&D
  • Policy, Politics and Conclusions
  • Formal FDI Openness in Global Comparison OECD Restrictiveness Index
    • Source: OECD, RHG
  • V. Conclusions and Recommendations
  • Conclusions 1. US booming for Chinese investors: but that’s not the story people hear 2. The driver is profit, the barrier is business acumen, but the scapegoat is CFIUS 3. US policy is functions well, the politics are frequently rash and capricious. With Chinese FDI booming and US politics neurotic, severe tensions are certain – unless misgivings can be resolved 4. More than $1 trillion Chinese OFDI by 2020: the local and macro stakes are serious
  • Recommendations 1. Send a clear and bipartisan message that Chinese investment is welcome 2. Systematize the promotion of FDI from China and elsewhere 3. Protect the investment review process from interference 4. Work to better understand Chinese motives 5. Communicate to China its share of the burden 6. Remain open to “what if” scenarios 7. Do not play the reciprocity game 8. Get our own house in order
  • Investment- Portfolio
  • Investment- Bonds
  • Aids & Loans
  • CHINA –CANADA ECONOMIC RELATIONS CANADA-CHINA
  • Trade
  • Trade: Canada 1% 2% 2000 2010 $ 2,723.5 bn $438.3 bn China's deficit $0.6 bn China's surplus $7.4 bn
  • Investment- FDI
  • Investment- Portfolio
  • Investment- Bonds
  • Aids & Loans
  • CHINA - LATIN AMERICA ECONOMIC RELATIONS Latin America-CHINA
  • Trade
  • China’s Trade with LA 91.5699 89.696 2001 China joins the WTO Total trade in 2010 : $181.2 bn Exports Imports
  • China’s share of trade in Central America/Caribbean 2000 vs. 2010 2000 2010 $ 2,723.5 bn $438.3 bn China's deficit $0.3 bn China's surplus $4.0 bn
  • China’s share of trade in South America 2000 vs. 2010 2% 2000 2010 $ 2,723.5 bn $438.3 bn China's deficit $1.2 bn China's deficit $25.3 bn
  • Investment- FDI
  • China: FDI in selected Latin American and Caribbean economies
  • Investment- Portfolio
  • Investment- Bonds
  • Aids & Loans
  • China is Investing Huge Amount of Money to Latin America
    • In Latin America and the Caribbean, Chinese direct investment emerged strongly in 2010, when its transnationals invested over 15.0 billion dollars in the region.
    • In 2010 China became the third largest investor in Latin America and the Caribbean, with a share of 9%, behind the United States (17%) and the Netherlands (13%).
    • Chinese investment has mainly been in Brazil, Argentina and Peru. Over 90% has targeted the extraction of natural resources, particularly the hydrocarbon sector and, to a lesser degree, mining.
  • China’s Natural Resources Deal With Latin America
    • Some of the largest investment have gone to Brazil and Argentina.
    • But china has extended even bigger loans to Venezuela, which is more than $32 billion.
    • Venezuela will pay its debt in oil, and in increasing amounts of it during the next decade
    • Venezuela says it has been exporting to China about 460,000 barrels a day, about 20 percent of its oil exports. It hopes to double that soon.
    • The loans are typically secured against revenues from oil sales to Chinese companies, purportedly at market prices, though there could be discounts in some cases.
  • CHINA – EU ECONOMIC RELATIONS
  • TRADE
  • China’s Trade with EU 311.478 168.445 2001 China joins the WTO Total trade in 2010: 479.89 bn Exports Imports
  • China’s share of EU trade 2000 vs 2010 16% 18% 2000 2010 $ 2,723.5 bn $438.3 bn China's surplus $10.2 bn China's deficit $143.0 bn
  • Top countries for German Exports in 2010
  • Investment- FDI
  • Chinese acquisitions of European targets
  • Top Chinese investment in European targets on record per sector1
  • Top Chinese investment in European targets on record per sector2
  • Made in Italy Chinese firms' presence grow
    • In 2001 there were about 7,500 Italian-owned garment makers in Italian textile hub Prato. Today there are 3,800.
    • Exports from Italian-owned garment makers in Prato have fallen from about €3.3 billion a year a decade ago to around €1.7 billion.
    • There are more than 4,000 Chinese-owned textile makers operating in Prato now compared with only about 400 a decade ago.
  • Investment- Portfolio
  • Investment- Bonds
  • China’s Involvement in EU Sovereign Bond
    • China bought debt bonds from Greece, Spain and Portugal, and other countries following the sovereign debt crisis in Europe. For an undisclosed sum.
    • China has undertaken the most intense industrialization of any nation in history, and the consequences, both positive and negative, have been profound.
    • China is a developing country it is also the world’s second largest economy, which has immense importance for global stability.
  • China’s investment in European Bonds
    • China has offered to buy European bonds, including Hungarian government debt, Greek bonds, and other euro-denominated bonds.
    • Many European leaders see china—whose more than $3.1 trillion in foreign-exchange reserves are the world’s largest- as an important source of capital.
    • But European still have concerns over access to the Chinese market, Ms. Merkel called for more cooperation regarding access to raw material and china’s subsidies for exporters
    • China had urges Europe to grant China recognition as a market economy and to remove barriers to trade
  • Aid & Loans
  • CHINA – RUSSIA AND REST OF EUROPE ECONOMIC RELATIONS Russia and Rest of Europe -CHINA
  • Trade
  • China’s share of trade in Russia and rest of Europe 2000 vs 2010 2000 2010 $ 2,723.5 bn $438.3 bn China's deficit $4.6 bn China's surplus $4.2 bn
  • Investment- FDI
  • Investment- Portfolio
  • Investment- Bonds
  • Aids & Loans
  • CHINA - MIDDLE EAST ECONOMIC RELATIONS
  • Trade
  • China’s share of trade in Middle East 2000 vs. 2010 4% 6% 2000 2010 $ 2,723.5 bn $438.3 bn China's deficit $3.5 bn China's deficit $22.7 bn
  • Investment- FDI
  • Investment- Portfolio
  • Investment- Bonds
  • Aids & Loans
  • CHINA - AFRICA ECONOMIC RELATIONS Africa-CHINA
  • Trade
  • China’s Trade with Africa 51.732 58.072 2001 China joins the WTO Total trade in 2010 : $109.8 bn Exports Imports
  • China’s share of trade in Africa 2000 vs. 2010 2% 2000 2010 $ 2,723.5 bn $438.3 bn China's deficit $11.5 bn China's deficit $125.2 bn
  • Sudan’s Oil Supply
  • Investment- FDI
  • Investment- Portfolio
  • Investment- Bonds
  • Aids & Loans
  • CHINA – ASIA ECONOMIC RELATIONS
  • Trade
  • China’s share of trade in Northeast Asia 2000 vs. 2010 19% 27% 2000 2010 $ 2,723.5 bn $438.3 bn China's deficit $11.5 bn China's deficit $125.2 bn
  • China’s share of trade in Hong Kong, Macau 2000 vs. 2010 2000 2010 Macau US$230.0 bn $438.3 bn $ 2,723.5 bn China’s surplus $35.7 bn China’s surplus $210.7 bn
  • China’s share of trade in ASEAN 2000 vs. 2010 11% 2000 2010 $ 2,723.5 bn $438.3 bn China's deficit $4.8 bn China's deficit $16.1 bn
  • China’s share of trade in South Asia 2000 vs. 2010 1% 3% 2000 2010 $ 2,723.5 bn $438.3 bn China's surplus $1.9 bn China's surplus $34.6 bn
  • China’s share of trade in Australia and Oceania 2000 vs. 2010 4% 2000 2010 $ 2,723.5 bn $438.3 bn China's surplus $0.7 bn China's deficit $ 25.3 bn
  • Investment- FDI
  • Investment- Portfolio
  • Investment- Bonds
  • Aids & Loans