Myth behind China’s Outward FDI

Hong Kong, Singapore, the British Virgin Islands, the United States, the Cayman Islands, the Netherlands, and Australia are some of China’s most well-known export destinations. Investing in these top nations increased significantly in 2015, reaching 101.63, or an average of 86.1 percent of all outward direct investment that was non-financial. In the same year, China invested a total of US$ 8.39 billion in the US, one of the countries of concern (Ministry of Commerce People’s Republic of China, 1). By September 2016 the actual investment by China stood by 4,1776.00 the most updated figure for the US stocks

By 2016 China’s stocks in the US have retained a 3 percent level for all its outward foreign investments. The highest stocks have gone to Hong Kong with a 69 percent share of all the stocks (Santandertrade.com, 1).

The US ranks the Chinese investment among the BRIC nations as first, and this is data by 2014. At just 3,415 Million China was first compared to other nations in the category.

In comparing owe and stock of US investment into the China it clear to note that US investment into China is very low. The US accounts for 2.7 percent of all investments in China while China controls over 3 percent according to MOFCOM data. According to this article, North America accounts for only 2 percent of global Chinese investments while the US has even a lesser value of almost zero. The reason behind these small investments is by far well explained. Chinese economy does not protect the intellectual rights that US multinational companies enjoy while conducting business. Second, there is a lot of protectionism for local market products and investors in China thereby limiting any external investors from making a living in the country.

Media reports have been unleashing unsubstantiated media reports about Chinese OFDI because the country’s foreign investments have been growing at a faster rate with the advent of a globalized business and media world. Many of these media outlets do not do research of these data for reasons best known to them. It is this lack of analytical and inquisitive skills that are making them publish such unsubstantiated results for the American public to be scared of in the long run.

The other reason is largely politically instigated. The Chinese government may be using media as a way to penetrate the US market since they feel there is a lot of pressure from politicians over the threat posed by Chinese products and multinationals trying to work in the US. The competition for US jobs is mainly the reason behind the threat, and therefore politicians should use corrupt measures to lure the media into reporting this information for the benefit of China. For example, MOFCOM reports FDI stock to be at 7.7% while the real data reflects 3% into the US. Huawei case of 2012 is another example of the political threat to Chinese companies.

The largest FDI occurring under the watch of the present Chinese government is the acquisition of General Electric Appliances by Haier a company based in Qingdao China. GE specializes in several household products and it to take up the acquisition from Haier at a market rate of US $5.6 billion (Thompson, 1).

Pro

The acquisition pro is that it would increase the position of Chinese Outward FDI stocks in the United States which will increase the investment requirement of the Chinese government into China.

Cons

Consumer confidence in the products would drop as a result of the acquisition since people trusted the company while it was in the hands of Americans.

There would be panic especially from existing employees over the loss of jobs after the completion of the acquisition.

In conclusion, it is evident that Chinese acquisition of GE at 5.6 billion represents a special quo in the industry especially when it relates to the countries involved. But even with that there is need to consider other avenues that the country can increase the stock level in the US to match that of Hong Kong which stands at 69 percent. The two governments need to shake off the political threats posed from all directions so that the economies can work collaboratively for the benefit of the whole globe and the regions.

Work Cited

Ministry of Commerce People’s Republic of China. Official of the Department of Outward Investment and Economic Cooperation of the Ministry of Commerce Comments on China’s Outward Investment and Economic Cooperation in 2015. Mofcom.gov.cn, 2017. Web.

Thompson, Ashlee, C. It’s official: GE appliances belongs to Haier. Cnet, 2016. Web

Santander Trade. China: Foreign Investment. Santandertrade,com, 2017. Web.