FDI Surges in China, Despite Rio Arrests

Posted by: Bruce Einhorn on January 15, 2010

I’ve been quick to say I told you so when I’ve been right about predictions, so I should be just as fast to say I goofed. News today about foreign investment in China shows just how wrong I was last year when I wrote that China’s arrest of Rio Tinto employees would spook would-be investors. Last July, in the midst of acrimonious negotiations over iron ore prices between Chinese companies and the Anglo-Australian resource giant, four Rio workers were detained on suspicion of stealing state secrets. At the time, I wrote on the Eye on Asia blog about the chilling effect this could have on foreign investment in China. “It’s hard enough for companies to negotiate deals in China without having to worry about whether their workers are going to find themselves in jail if some Chinese officials decide they don’t like the way the talks are going,” I wrote.

Apparently, not too many companies are that concerned after all. According to this story by my Bloomberg News colleagues, foreign direct investment in China has been booming. FDI in December more than doubled, to $12.1 billion. Investment for the year as a whole was down 2.6%, to $90 billion, but given how the financial crisis hammered investment early in 2009 that’s a pretty strong performance for China.

Reader Comments

C. H. Ng

January 15, 2010 6:20 AM

Not only you, Bruce, are wrong in this case but many a time alot of westerners got it wrong on their predictions where China is concerned. I guess many westerners do not really know how the Chinese people tick.
Just like Google who threaten to pull out of China. Will the Chinese or their government care? I don't think so and I believe Google got more to lose by pulling out. Anyway Google's loss will be Baidu's & other's gain and they will be laughing all their ways to the banks.

Maersk

January 15, 2010 6:32 AM

To Bruce Einhorn: so is it about time for you to stop bad mouthing China for a living and get a real job then?

huyu

January 15, 2010 9:07 AM

Hey Businessweek. Or any media outlay of your kind. We accept every petty berating of yours on us; this is just the world we live in. To your full satisfaction, please with that, leave us alone. We are already in awe that you guys control the media, air waves, and the discourse on this planet, we have no intention of competing with that, and we are very poor at doing that anyways. Over here in Beijing, not everything is a media fiesta and a talking shop, and we are not going to give up tried-and-true needs to ensure stability which we have not had since 1820's. I wish my countrymen are a mature bunch and do not get into a situation like our tradition-seeking long-knife carriers had done, but that is not the world I live in. In any case, we have got our poor to feed and the country to develop. I am already perspiring from this hard labor I have to put in everyday and every hour, let alone dealing with your flying saliva. For anyone else, if you want to invest here, please you must do your own research and visit us. We will treat you to the best feasts that you can experience in your life time. In the end you may still be free to take your money elsewhere, fair and simple.

py

January 15, 2010 12:00 PM

silly

py

January 15, 2010 12:05 PM

as a experienced reporter, you made a very silly comment.

it is funny to see more of your biased predictions about China in the years to come.

Not good for you

John Thomas

January 16, 2010 4:57 AM

If you want to know who is going to win the international investment sweepstakes, take a look at the table of 2010 consensus GDP Growth Estimates below. The ranking, prepared by the good folks at the Bespoke Investment Group, is very crowded at the top with countries I have been banging the table about for the last year. The odds on favorite is China (FXI), coming in at a breathtaking 9.4% forecast. The truly amazing thing is that China continues delivering blistering growth, while having the fourth largest GDP in the world ($4.3 trillion), after the EC ($18.4 trillion), the US ($14.4 trillion), and Japan ($4.9 trillion). That's why it is my lead canary in the coal mine for the global risk appetite, which at the moment is expanding. Next comes Indonesia (IDX), an emerging market oil and LNG exporter, and one of the top performing stock markets last year, boasting a 5.55% forecast. Brazil (EWZ), the country that does everything right and will host the 2016 Olympics (look at the astronomical move China's market delivered in the eight year run up to their Olympics), could bring in a 4.75% rate. Hong Kong (EWH) comes in at 4.45%, no doubt benefiting from proximity to the Middle Kingdom. South Korea (EWY) is expected to bring in a 3.95% growth rate. The US (SPX) growth forecast is at 2.6%, very close to my own. Skip Spain, which is enduring a subprime induced real estate meltdown that makes ours look like a walk in the park, and suffers the only negative GDP forecast for 2010. It is no revelation that you should be shoveling money into high growth countries, and passing on the also rans, like the US. Madhedgefundtrader

Taishan

January 16, 2010 5:07 PM

Eh, who hasn't been wrong about China at one time or another. A few years back, I would have said "no way" that China would become the largest auto consuming nation in the world before the end of the decade. I certainly would have gotten that one wrong (and happily so :). What I am thankful for, is that most of the time, when people are wrong, they error on the conservative side and China ends up overshooting the predictions :)

Xiang Yu

January 16, 2010 8:06 PM

This is not the first time western business journalist was wrong about China. Remember all those overheat predictions couple years ago?

Dake

January 17, 2010 10:51 PM

Thanks for your honesty Bruce. You have shown others what is journalist's ehics - honesty, frank, responsible, rational, unbiased and well informed.

C. H. Ng

January 18, 2010 12:36 AM

Bruce...the arrest of a few Rio Tinto workers won't frighten investors away. Nor would the claim of cyber hacking & subsequent announcement by Google that they are quitting China will have much effect on other would-be investors.

Investors will only turn away if the place is not safe (maybe due to internal strifes), unfavorable terms & conditions set by host government (which includes bribery), high costs & etc..etc. Definitely not by small issues such as the arrest of few workers or the hacking outcry raised by Google & supported by the US government.

Dan

January 18, 2010 8:29 PM

Frankly I don't really care if China is #1 or 2 or 3 in anything. As long as they can provide the basic needs and services for the citizens, those rankings are just icing on the cake. It's surely better than calling ourselves communist/capitalist/fascist/democratic, than let our citizens live in slums, go hungry, born 3rd class because they purportedly belong to a certain caste.

RICHARD JIANYI HE,SHANGHAI

January 21, 2010 1:23 AM

you don't deserve your title and salary.You should flee like the greedy bankers on the STREET.Bye.

Post a comment

 

About

Bloomberg Businessweek’s team of Asia reporters brings you the latest insights on business, politics, technology and culture from some of the world’s biggest and fastest-growing economies.

BW Mall - Sponsored Links

Buy a link now!