Bamboo can grow 48 inches per night. It grows in China and Southeast Asia. How appropriate.
Like bamboo, China’s economy seems to sprout overnight. In 2009 alone, its gross GDP increased 8.7%, and 2010 promises similar gains. Much of these astronomical earnings are due to China’s sky-high inward foreign direct investment (FDI).
Foreign direct investment is the long-term economic participation of one country in another, usually through transfer of technology, joint ventures, stock market participation and foreign ownership of assets.
Originating with the 1979 Chinese Foreign Join Venture Law and spurred onwards by the subsequent ubiquitous economic zones, China’s inward FDI burgeoned from a total $19.6 billion to over $300 billion in less than a decade. It was ranked as the 4th highest FDI recipient in 2006, and in 2009, China raked in over $90 billion. FDI remains a big ingredient in China’s economic recipe.
But some investors doubt the stability of China’s exploding economy, and others voice concerns about China’s business practices.
China faces a shortage of skilled workers, such as engineers, doctors and scientists, but has initiatives to improve education and so remedy their deficiencies. Dr. Seamus Grimes says, “The state has become increasingly wary about its dependence on foreign technology.” This bodes ill for companies planning on an invite due to their technological expertise – if China has anything to say, they won’t need it.
Some businesses are wary of China’s authoritarian capitalism, with its cornucopia of licenses and permits. A survey from the American Chamber of Commerce indicates that many foreign-based businesses worry about the growing protectionism in China, as the behemoth plans on using its newfound expertise to become self-sufficient. Respondents worried most about inconsistently applied regulations.
But, as the PBG Economic Cooperation Forum says, China is still one of the best FDI destinations. Its growing infrastructure and logistics network encourage investment, and in their opinion, government regulation is supportive.
Of what are businesses afraid? Bamboo. Most bamboo only flowers every 60 to 120 years; the rest of the time, it remains sparse. Investors fear that, despite incredible growth, there will be nothing to reap.