By Abid Aslam
WASHINGTON - The United States has reemerged as the world's premier destination for foreign investors but could face stiffer competition for foreign assets from China and other developing economies, a UN report says.
Foreign investment in the United States grew by 74% to US$175.4 billion in 2006, almost twice the global growth rate of 38 %, the UN Conference on Trade and Development (UNCTAD) said in its 2007 World Investment Report.
US assets thus attracted more than one-tenth of the $1.3 trillion in foreign direct investment inflows worldwide, UNCTAD said. Flows to the advanced economies rose by 45% to $857 billion. Investments in developing and former Soviet bloc countries rose by 21% (to $379 billion) and 68% (to $69 billion), respectively.
Last year's total was the highest since 2000, when the amount of foreign corporate money flowing into all countries peaked just above $1.4 trillion before technology stocks began to tumble. Terrorist attacks in the United States the following year added to a worldwide slowdown.
China saw its inflows fall for the first time in seven years to $69.5 billion from $72.4 billion in 2005, UNCTAD said. China's investments in the rest of the world surged, however. Its state-owned and private companies poured $16.1 billion into foreign assets last year, up 34 % from $12 billion the previous year.
Chinese firms' foreign holdings seem likely to rise further, UNCTAD said.
Last month, China launched a $200 billion investment fund that could come to rival US investments in the rest of the world. Last year, US corporations bought up foreign assets worth $216.6 billion.
South, Southeast and East Asian firms' investments in other regions swelled by 60% to $103 billion last year, equivalent to slightly more than half of the record $200 billion invested in the region by foreign firms.
Most corporate money - including most Asian investment overseas - flows into the US and European economies. However, China, India, and other rapidly growing Asian economies in need of energy and metals have fueled an investment boom in Africa.
Corporate money flowing into the continent doubled between 2004 and 2006 to a record $36 billion, the report said. Asian firms generated more than a quarter of the total and look poised to increase their share. This is no mean feat since most of them are tiny compared to US and European counterparts and most are newcomers to a continent dominated by Western investors since colonial days.
About half the total went to cross-border mergers and acquisitions and the other half was plowed into so-called greenfield investments, such as new factories or mines built from scratch. Transnational corporations from Asia accounted for half of the mergers and acquisitions.
Eight billion dollars, or more than one-fifth of all foreign investment in Africa, went to the continent's least developed countries last year, reversing a two-year decline. The largest increases took place in Burundi, Djibouti, Guinea-Bissau, Somalia, Madagascar, Ethiopia, Cape Verde, Gambia and Sudan.
"The commodities boom should provide opportunities for development and poverty alleviation in mineral-exporting countries," UNCTAD said. Results so far have been mixed and a number of countries are seeking to reduce foreigners' stakes in local companies or to increase the share of revenues that foreign firms must reinvest locally or share with host governments.
"Ultimately, the overall impact of revenue generated will be determined by the way it is shared between the foreign companies and the host country, and on how government's portion of the revenue is managed, distributed, and used," the report said. "Funds should be used to support development objectives and the needs of current and future generations," it added.
For their part, African firms invested a record $8 billion overseas, up from $2 billion in 2005.
Foreign investment in Latin America and the Caribbean rose by 11% to $89 billion but most of this went to the region's offshore financial centers. Outflows from Latin America and the Caribbean, excluding those from offshore financial centers, rocketed to $43 billion in 2006, an increase of 125% over the previous year. Brazil led the outward charge with $28 billion invested overseas - a mammoth advance over $3 billion the previous year and enough to exceed inbound investments for the first time.
Southeast Europe and the Commonwealth of Independent States received $69 billion in foreign investment last year, a 68% rise, while investing $19 billion overseas, a 27% increase driven mainly by Russian firms.
West Asia - a 14-country demarcation broadly consistent with what is called the Middle East - saw a 44% rise in inflows to $60 billion while investing $14 billion overseas, 5% more than in 2005, UNCTAD said.
Seven of the world's top 20 investment hosts are in developing regions. They are China, Hong Kong, Russia, Singapore, Turkey, Mexico, Brazil, and Saudi Arabia.
Three of the top 20 sources of foreign investment come from developing regions: Hong Kong, Brazil and China.
Global firms from advanced economies generated 84% of all outward investment in 2006, with the remaining 16% coming from corporations based in developing regions and the former Soviet Union, UNCTAD said.
(Inter Press Service)
Thursday, October 18, 2007
Multinationals fear US-China trade wars
By Dan Steinbock
After several Chinese product recalls in the US, China retaliated by rejecting US goods for quality deficiencies. Now, Washington and Beijing have filed complaints against each other at the World Trade Orgaization (WTO). The US Congress is about to enact legislation that would levy punitive duties on Chinese goods. This could lead to unintended consequences for both American consumers and the wider US economy.
Some 119 leading multinational companies agree - including Boeing, Citigroup, General Motors, and Microsoft. They have called on Congress to reject protectionist legislation against China, arguing that "imposing unfair barriers to trade in the name of currency valuation or product safety is not a solution to the underlying concerns". It was "a vote for free trade", reported the state-owned China Daily, which, as so many other Chinese observers do, argues that rising protectionism among some US lawmakers "seriously threatens the interests of China, the United States itself and the world at large".
The flat world in Guangzhou
As the high-speed ferry took off from Hong Kong, the young municipality worker continued to read his copy of Thomas Friedman's bestseller, The World is Flat. He had about an hour to go before the ferry would dock in Guangzhou. "This book has a great following in China," he said. "The world is flat."
In Guangzhou, the capital of southern China's Guangdong province, such views are common. With 92 million people and a GDP of US$284 billion in 2005, Guangdong is the most prosperous province in China, accounting for more than 12% of the national total. It also has the highest volume of imports and exports.
But Friedman's world may be fading.
"Exaggerating individual cases and doubting the quality of all made-in-China products has hurt our reputation and caused economic losses to our exporters," said Qi Xiuqin, a high-level official at China's quality supervision administration (GAQSIQ) in mid-September.
According to a recent GAQSIQ report, some 30% of a sample of 2,500 Chinese exporters suffered economic losses from the imposition of technical trade barriers last year. The companies lost $35.9 billion, up from $28.8 billion in 2005.
Increasing friction
Last April, the United States took China to the WTO over piracy and copyright protection. Beijing said that the decision would "seriously damage" bilateral cooperation and harm business ties. Washington has brought four complaints against China to the WTO since 2006.
International trade, however, is a two-way street.
In mid-September China filed a complaint against the US over its combined countervailing anti-dumping rulings on Chinese coated paper. The WTO case is the first initiated by Beijing against Washington in five years.
After high-profile Chinese product recalls in the US, Chinese inspectors have seized, returned or rejected a slate of US-made product shipments - from orange pulp and dried apricots with high levels of bacteria and preservatives, to powdered milk imports too toxic for children.
In the most recent case, a shipment of 47 tons of frozen sardines originating from the US was rejected. Chinese regulators said it was infected with disease-inducing bacteria.
'Playing with fire'
Last summer, Senators Hillary Clinton and Barack Obama agreed to co-sponsor legislation that would levy punitive duties on Chinese goods. The bipartisan bill introduced by senators Max Baucus, Chuck Grassley, Charles Schumer and Lindsey Graham, would permit US companies to seek anti-dumping duties on Chinese imports based on the undervaluation of the currency.
During the past few weeks, US Treasury Secretary Henry Paulson has repeatedly warned Congress against making legislation aimed at punishing China over its economic policies. "When we look at taking unilateral actions aimed at another nation, this can have enormous repercussions to our economic well-being," Paulson said. "You know, we're playing with fire."
Typhoon arising
As we approached Guangdong, the municipality worker set aside his book. "For Chinese people, it is sometimes hard to understand America," he said.
"We have opened our doors to Coca-Cola, Ford, Motorola, and GE. We want to do business. We believe that it's a win-win to China and America. We thought that America believed in a flat world."
Dan Steinbock serves in the India, China and America Institute. Focusing on issues of international business and international relations, he resides in the United States, China and Europe.
(Republished with permission from National Interest Online. Copyright 2007, The National Interest)
After several Chinese product recalls in the US, China retaliated by rejecting US goods for quality deficiencies. Now, Washington and Beijing have filed complaints against each other at the World Trade Orgaization (WTO). The US Congress is about to enact legislation that would levy punitive duties on Chinese goods. This could lead to unintended consequences for both American consumers and the wider US economy.
Some 119 leading multinational companies agree - including Boeing, Citigroup, General Motors, and Microsoft. They have called on Congress to reject protectionist legislation against China, arguing that "imposing unfair barriers to trade in the name of currency valuation or product safety is not a solution to the underlying concerns". It was "a vote for free trade", reported the state-owned China Daily, which, as so many other Chinese observers do, argues that rising protectionism among some US lawmakers "seriously threatens the interests of China, the United States itself and the world at large".
The flat world in Guangzhou
As the high-speed ferry took off from Hong Kong, the young municipality worker continued to read his copy of Thomas Friedman's bestseller, The World is Flat. He had about an hour to go before the ferry would dock in Guangzhou. "This book has a great following in China," he said. "The world is flat."
In Guangzhou, the capital of southern China's Guangdong province, such views are common. With 92 million people and a GDP of US$284 billion in 2005, Guangdong is the most prosperous province in China, accounting for more than 12% of the national total. It also has the highest volume of imports and exports.
But Friedman's world may be fading.
"Exaggerating individual cases and doubting the quality of all made-in-China products has hurt our reputation and caused economic losses to our exporters," said Qi Xiuqin, a high-level official at China's quality supervision administration (GAQSIQ) in mid-September.
According to a recent GAQSIQ report, some 30% of a sample of 2,500 Chinese exporters suffered economic losses from the imposition of technical trade barriers last year. The companies lost $35.9 billion, up from $28.8 billion in 2005.
Increasing friction
Last April, the United States took China to the WTO over piracy and copyright protection. Beijing said that the decision would "seriously damage" bilateral cooperation and harm business ties. Washington has brought four complaints against China to the WTO since 2006.
International trade, however, is a two-way street.
In mid-September China filed a complaint against the US over its combined countervailing anti-dumping rulings on Chinese coated paper. The WTO case is the first initiated by Beijing against Washington in five years.
After high-profile Chinese product recalls in the US, Chinese inspectors have seized, returned or rejected a slate of US-made product shipments - from orange pulp and dried apricots with high levels of bacteria and preservatives, to powdered milk imports too toxic for children.
In the most recent case, a shipment of 47 tons of frozen sardines originating from the US was rejected. Chinese regulators said it was infected with disease-inducing bacteria.
'Playing with fire'
Last summer, Senators Hillary Clinton and Barack Obama agreed to co-sponsor legislation that would levy punitive duties on Chinese goods. The bipartisan bill introduced by senators Max Baucus, Chuck Grassley, Charles Schumer and Lindsey Graham, would permit US companies to seek anti-dumping duties on Chinese imports based on the undervaluation of the currency.
During the past few weeks, US Treasury Secretary Henry Paulson has repeatedly warned Congress against making legislation aimed at punishing China over its economic policies. "When we look at taking unilateral actions aimed at another nation, this can have enormous repercussions to our economic well-being," Paulson said. "You know, we're playing with fire."
Typhoon arising
As we approached Guangdong, the municipality worker set aside his book. "For Chinese people, it is sometimes hard to understand America," he said.
"We have opened our doors to Coca-Cola, Ford, Motorola, and GE. We want to do business. We believe that it's a win-win to China and America. We thought that America believed in a flat world."
Dan Steinbock serves in the India, China and America Institute. Focusing on issues of international business and international relations, he resides in the United States, China and Europe.
(Republished with permission from National Interest Online. Copyright 2007, The National Interest)
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