Follow the money

Will China's ongoing economic transformation make it less attractive to investors?

For multinational companies that have long benefited from, or are seeking to tap into, the growth of the world's second-largest economy, this is indeed a question worth due consideration.

Representatives of China National Offshore Oil Corp and China National Petroleum Corp flank Brazilian officials after a bidding ceremony on Oct 21 for a 35-year production sharing contract to develop Libra, a deepwater oilfield off the coast of Rio de Janeiro. [Photo / Xinhua]

In spite of the spectacular investment record that some of them have achieved on the back of China's double-digit growth over the past three decades, blind optimism is simply a luxury that no company can afford at present as the global economy is yet to experience a sustained recovery from the effects of the 2008 financial crisis.

However, while it is wise to be cautious, there is no reason for foreign investors to do an about-face.

While admitting that China's growth remains by far the fastest of any major economy, some Western media have tried to make the unimpressive quarterly earnings results of a few foreign companies evidence that China's slower growth is a drag on Western profits.

Has China's economic slowdown, largely a result of industrial restructuring and the clampdown on government and commercial corruption, affected the business of certain foreign investors?

Sure.

Yet, is that a sound reason to thus regard China as a drag for foreign investors as a whole? The answer may be yes for those who believe the claims that some of the European economies are now showing signs of stabilizing and the United States' economy is beginning to wake up.

But it is a different story for the majority.

As a report by the Organization for Economic Cooperation and Development highlighted recently, preliminary data for the second quarter of 2013 show that while the global foreign direct investment activity declined by 28 percent to $256 billion, China still attracted the lion's share of $61 billion, or 21 percent of the total.

Chinese statistics also indicate that over the first three quarters of the year, the country's inflow of foreign direct investment was up 6.22 percent on a year earlier.

As competition to woo China's growing middle class becomes increasingly fierce, it is unwise to make a big fuss over the complaints of those for whom no market is profitable enough.

Any company that is having second thoughts about China, would do better to remember that money talks loudly but headlines age fast.

(China Daily 11/08/2013 page8)