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FDI door still wide open

2011-01-20 17:34

Loud as they are, the complaints from some US companies about China's business climate sounds more like a case of crying wolf. It simply flies in the face of the record foreign direct investment (FDI) that China attracted in 2010.

It was reported that an annual survey by the American Chamber of Commerce in Shanghai showed that an increasing number of US companies in China say the enforcement of intellectual property rights has deteriorated in the last year and that the regulatory environment is the biggest hurdle to doing business in the city.

Such a finding comes as President Hu Jintao begins a state visit to the United States, ostensibly giving more ammunition for those in the US who want to take a hawkish stance against China. But, while some individual US multinationals might have seen dwindling opportunities for investing and making big bucks in the world's second-largest economy, China is an undeniable profit center for the majority of US companies.

It goes too far to say that China's business climate has deteriorated when foreign investors are flocking here with unprecedented enthusiasm.

Latest statistics show that foreign direct investment into China hit a record $105.7 billion last year, up 17.4 percent year-on-year. Clearly, such rapid FDI growth speaks volumes about foreign investors' confidence in the Chinese economy, as well as the country's openness to foreign investment.

One possible explanation for the claims that China's business climate is deteriorating for foreign companies is that emerging local players and FDI newcomers have made the competition in the Chinese market fiercer than ever.

The rise of the Chinese economy over the past three decades has not only tremendously strengthened the competitiveness of Chinese enterprises, but also made the domestic market a battlefield for almost all the world's top companies.

Compared with the early years of China's opening-up when foreign investment was badly needed to set examples for growth, it is only natural that the importance and superiority of foreign companies is declining now that the Chinese economy has grown so fast and foreign investment has become so ubiquitous.

With a foreign exchange reserve close to $3 trillion, China is no longer a fund-thirsty economy. But the abundance of domestic funds does not mean China will shut the door on foreign investors to make room for domestic companies. Instead, policymakers will focus more on attracting foreign direct investment that can play a role in making the country's economic growth more environmentally friendly and sustainable.

Gone are the old days when US companies could take a lion's share of the Chinese market. Even so, the transformation of China's economic development will surely provide enough opportunities for investors at home and abroad as long as they adapt their businesses to the changes.

US companies have long been known for their adaptability. Now, it's time for them to roll their sleeves up.

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