China's The first article is January 27, 2003 issue of large scale
introduction of foreign investment in China because Mr. Wong come to surprising
conclusions was: foreign investment in China is sometimes inappropriate, they
tend to Chinese domestic companies at the expense, which is China's attempt to
support the domestic economy in the least efficient 部门 direct result of China's
growing Waiguotouzi Shiji for domestic companies will help to consolidate a
negative system. more comments, and actively introduce foreign investment as an
economic result of the foreign investment accounted for nearly 20% of the tax
can be said that China has formed a study. in terms of economies of scale do not
appear to be so prominent, the United Kingdom, Germany, Brazil, Mexico, Ireland
in this regard more than the Chinese of these countries the proportion of
foreign-owned domestic higher than China's addition is a discussion I have with
India Professor Han Taiyun American co-wrote in 2003, published in the U.S. from
its foreign investment restrictions.
me on the following four questions in
this article make a clear and concise as possible: 1) China has no dependency
syndrome and the second question has a very detailed analysis. the third and
fourth issues are discussed but no discussion. I am here to add one point.
China's I talked about in this book, efficient than state-owned enterprises
more competitive. efficient domestic capital refers to investment in private
enterprises in China, investment in private enterprises account for only a small
fraction of total domestic investment, according to In 2003 private and
individual economic investment in fixed assets was 756.3 billion yuan,
accounting for fixed assets of 13.7% the same year, foreign direct investment is
444.13 billion yuan, that of foreign investors in an efficient domestic capital
ratio is 0.587 (444 130 000 000 million divided by 756.3 billion yuan).
course, some readers pointed out that the incomplete statistics of China's
private economy, many companies are private, the collective nature of collective
economy .2003 investment in fixed assets was 780.69 billion yuan, if the Chinese
artificially inflated the definition of private and collective enterprises are
all counted as private enterprises, China's foreign investment in efficient
internal capital ratio is 0.29. in this way we can come to rely on China's
foreign investment is lower upper and lower limits .0.29 , and 0.58 is the upper
limit. real number should be between the two figures.
Now let us comment on
Germany, Brazil, Mexico, Ireland, although in the foreign / domestic ratio of
total over China, but we can not forget that these countries are private or
largely private economy. they are all owned by private enterprises within, which
and until today the majority of our investment in China is done by the
state-owned enterprises is different. state-owned enterprises to invest
regardless of cost, so they are over-invested in other things being equal, if
there is a large number of state-owned enterprises, FDI / Investment in fixed
assets ratio will naturally become very low.
more accurate comparisons,
should be to China's foreign / private investment ratio compared with other
countries. Mr. Hu Zuliu in an article entitled foreign investment on China's
three major issues, countries, in only three countries, FDI / investment in
fixed assets ratio higher than China: Singapore (0.34), Netherlands (0.33), and
Ireland (0.71) If we use this ratio 0.58, and that only Ireland had a higher
than China < br> to pay attention to Singapore, the Netherlands, and
Ireland is the world's dependence on foreign countries recognized while they are
small countries, it is easy to rely on foreign capital. (for example, run the
two airlines in Singapore, there must be a foreign-funded enterprises must be .)
means that China's dependence on foreign capital and the world has recognized
close to the foreign-dependent countries, which form a continental economy, has
a population of 1.3 billion is a big country in terms of very abnormal.
Generally speaking, large countries independent, less dependent on foreign
capital, such as in the 1990s, the U.S. FDI / capital percentage is within 6.2%,
although foreign direct investment flows into the U.S. in absolute terms than
China Canada is 8.3%; Brazil is 5 percent of China's FDI / the proportion of
domestic capital several times beyond the East Asian economies.
1990's,
South Korea
Brennan Boesch
Jersey, this ratio is 1.1%; Taiwan is 2.8%.
Incidentally, China's
foreign trade dependence has reached an alarming height .2004 China's foreign
trade / GDP ratio up to 0.70 as compared to the United States in the 1990s,
foreign trade volume is equivalent to 0.20 of its gross national product,
Japan's ratio is 0.25, although the United States and Japan is full and open
economy, they the degree of trade dependency is much smaller than China.
policy conclusions. Some scholars have suggested that the domestic
government to restrict foreign investment in order to protect the so-called The
problem is not opening up too, but opening up a serious shortage. In other
words, China's foreign / domestic efficient high proportion of the denominator
of the problem, not the problem elements of China's financial and legal system
severely limits development of private enterprises in China, while China lags
behind the development of private enterprises to foreign companies to
artificially create a commercial space, leading to large-scale entry of foreign
capital and this is my 1990 analysis of foreign investment in China.
In this
article I behind this analysis and this book will give a more detailed
explanation. Here I would like to make a little note on two problems First, I do
not agree that 企业 is not Waiziqiye out, but their very unreasonable by the
Chinese economic system out of .1970 years we have not a penny of foreign
capital, but then there really any private enterprise? the opposite is true.
In the 1990s, the development of private enterprise under the but is
hampered by a variety of foreign capital to private entrepreneurs to obtain a
certain amount of development funds, and I in Chapter 4 of this issue a detailed
analysis of foreign investment in China is very labor-intensive industries large
contribution
Max
Scherzer Jersey, but it's most important contribution of foreign capital to
private entrepreneurs played a role in providing venture capital, rather than a
general analysis is that foreign investment has brought China's export market,
thanks to the introduction of .1990 foreign investment from Hong Kong, Taiwan
and Macau into China's labor-intensive industries to some extent foreign species
is an unreasonable place in China's financial system. domestic commented that I
was .
The second problem is to identify clearly the economic development and
foreign investment relations. Many commentators often say that China's
high-speed growth of foreign companies in China market prospects, the large
increase in foreign direct investment. This view is not comprehensive.
high-speed economic growth can lead to foreign investment in China, the absolute
amount of increase, but will not lead to China's dependence on foreign capital
increase (absolute increase in the amount refers to the amount of foreign
capital is the change in time, such as 1990 year, China attracted 34 billion in
foreign direct investment in 2003 China attracted 535 billion dollars in foreign
direct investment. foreign dependence refers to the foreign / domestic ratio.)
the simple reason that if China attractive market for foreign companies,
then it should also appeal to Chinese enterprises, so the investment of Chinese
enterprises will also increase if both foreign and Chinese enterprises to
increase investment, foreign direct investment of China's total investment ratio
should remain unchanged
Felipe Lopez
Jersey, or little change in China in the 1990s, increased reliance on
foreign capital and close to some small level shows that the Chinese
enterprises, mainly private enterprises, because the system's limitations can
not invest.
the largest of China's economy is characterized by
macro-economic development Soon, however, unsatisfactory performance of
micro-economic, such as China's annual GDP growth in the past 15 years has
remained above 8%, but China's stock market returns since 2000 has been
negative, which is an incredible phenomenon.
To answer this question, we
must investigate why so weak competitiveness of Chinese enterprises, first it
should be noted that China actually has a lot of the conditions for the
formation of competitive advantage of China's abundant human resources, rather,
the total number of scientific and technical personnel, education penetration
not only more than many developing countries, but also more than some developed
countries, China also has a Harvard Business School, Michael Porter (Michael
Porter), Professor of competitive advantage to develop some of the important
conditions, such as huge and diverse domestic market, Many factors of production
can be self-sufficient, China does not lack of funds, although China's per
capita income is not high, but China's savings rate is the highest except
Singapore. In fact, China exports a large scale every year fund.
China's
main problem is the economic system, while the problem is the so-called
state-owned economic system, institutional issues. the irrational economic
structure and distorted resource allocation system resulted in lower overall
competitiveness of Chinese enterprises.
I focus in this book On three.
First, although private enterprises and efficient than state-owned enterprises,
private enterprises, but no funding is competitive not form from the early
1980s, countries and regions all over the world not only through economic
globalization is more important privatization of the economy, but in China, from
bank loans, foreign exchange supply, the allocation of business opportunities,
political and legal support are inclined to inefficient state-owned enterprises
until a few years ago
Tim McCarver
Jersey, private enterprises, especially private enterprises, can not enter
the so-called strategic, high-profit industries, such as the 1990s, the private
sector in order to enter the electronics, machinery, automobile industry, such
as, will encounter a variety of policy constraints, while as finance,
telecommunications services, energy such as private industry by 2005 is
impossible to enter. more bank loans to state-owned enterprises are large-scale
tilt. Although the more efficient private sector are facing lack of funds.
wealthy state-owned enterprises and private resources lack of resources
while promoting foreign investment into the 1990s, micro-factors. the book's
fourth and fifth chapters of this issue in detail. dependent on policy support
to state-owned enterprises to purchase a large number of machines and equipment,
some quite advanced, and accumulated a large number of assets a considerable
part of the state-owned enterprises in the 1980s are the object of government
key support of these companies import a considerable number of, sometimes a full
set of equipment. a considerable number of enterprises and foreign companies and
technical cooperation projects, hold time is advanced in China technology, but
because of inefficient state-owned enterprise, losses, state-owned enterprises
into a takeover target. We know that when a company has good assets but poor
management, then this business is a very attractive acquisition target, but For
a long time, if the acquisition of state-owned enterprises of private enterprise
is privatized, it is not permissible, while if it is a foreign acquisition, was
considered to be ;. at all levels of government not only permitted but also give
a lot of subsidies.
I explained in Chapter 5 in the 1990s, foreign companies
and state-owned enterprises to establish joint venture is actually a lot of
foreign companies acquired the assets of state-owned enterprises , do not we
talk about a joint venture general.
general contract funded joint venture
the two companies to develop a parent does not produce new products, and
state-owned enterprises in China and the fact that the Chinese joint venture
parent company in name only these joint venture is similar to state-owned
enterprises into joint-venture financial institutions by type of business, it is
not carried out in industrial company. Most of these companies are often the
proceeds from the investment income, rather than operating income.
for lack
of funds for private entrepreneurs, foreign investors will provide a certain
amount of development funds, which is why state-owned enterprises and private
enterprises are welcome foreign investment, but they welcome foreign investment
is very different reasons. state-owned enterprises have assets no ability to
venture into the vast amount but was ineffective use of the realization of
assets means the ability of private enterprise is no assets
Denny McClain
Jersey, their access to foreign capital has become one of the few channels.
I put in the book chapter The combination of private enterprise and foreign
investment as a risky investment than the so-called venture capital is equity
investment, it occurred because banks are reluctant to companies with high
credit risk in a market economy, such enterprises are often not market-tested
production new products or technologies.
the vast majority of private
enterprises in China, there is no risk of product or technology, but in China's
political risk under the system they have. This kind of discrimination in the
private entrepreneurs to foreign artificially created investment opportunities
in the United States, venture capital furniture has a high bargaining power,
because they do not need and bank competition, they tend to be controlled to
meet the requirements, because businesses can not obtain other financing in
China, because banks are not lending to private enterprises , making Hong Kong
and Taiwan are small enterprises in the mainland investment holding.
China's
economic system is another serious problem of local protectionism. There are
many national studies of local protectionism, and I will not repeat them here
and I think emphasize two points. First, local protectionism and artificially
increase the bargaining power of foreign investors because the domestic firms
only in areas in which they choose investment projects, they often can not
choose the best investment projects, while foreign companies are not subject to
this restriction, they can choose to invest in projects across the country and I
in Chapter 6 analyzes why companies such as second choice to invest in the
country. One of the reasons is because the separatist region of China's capital
market, the second Local protectionism is a considerable extent caused by the
state-run system. important reasons. In other words, if the change of state
institutions, we do not need to use the Since 2000, India began to pay attention
to when I taught at Harvard to write the case, I chose the pharmaceutical
industry on this subject. I started to notice that India's pharmaceutical
industry is mainly driven by its local private sector of which the Chinese to
State-owned and foreign-based development model completely different India's
success in the pharmaceutical industry has another meaning: we can not Indian
companies in the pharmaceutical industry's success simply attributed to the
language factor, although India has the advantage of English, However, this
advantage in the pharmaceutical industry is not as important as the software
industry, so the reason for this difference are many, far from cultural and
language differences can be explained.
I also briefly in the book reference
to India's development model, highlighting that it is mainly a large number of
outstanding local company's performance in November .2001 Project Syndicate for
the first time I made this proposition: and India, the Chinese economy took off,
but China's enterprises did not take off. more domestic interest in India in
late 2003 .2003 November official website of the Chinese with Indians, Professor
Han Taiyun I co-wrote, published in the United States' foreign policy 'on the'
India can catch up China? kind of the opposite opinion, while interesting, in my
opinion, although these two diametrically opposed viewpoints, but their reasons,
they have strikingly similar errors. The first view is that India's foreign
direct investment in China is the only First, note that as China's economic
performance. The second view is that India's foreign direct investment in China
is only 1 / 10, indicating that in order to nurture local companies to adopt
stricter than China's foreign policy point of view there is nothing to these two
According to.
we examine the first view should bear in mind, foreign direct
investment is only one country and another country economic exchanges occur in
one of many ways in addition to foreign direct investment, there is neither
indirect investment mm With control of the equity investment mm and outsourcing.
Outsourcing refers to the type of orders or contracts based on corporate
cooperation within and outside of China's foreign direct investment in many, but
almost no orders for any indirect investment and cooperation in India is just
the opposite It's direct investment is small, but it has a lot of indirect
investment and a lot of outsourcing, why is there a difference in India? The
reason is that the micro and institutional basis of India than we do.
can
easily explain why India attract a large number of indirect investment:
its
corporate governance far more than China. direct comparison of the two corporate
governance materials is small. CLSA Ltd. in April 2001, published on governance,
3.4 points in the ranking of all countries, India ranked sixth, China ranked No.
19. CLSA report to India in several areas of corporate governance play score
higher than their overall score in the corporate governance regulations, the
implementation of these regulations, as well as CLSA Indian company in a very
low rating, many of which are state-owned company, which is very telling, but
also explain why the poor performance of China's management provides a clue:
Corporate Governance in China's biggest problem is government-to-business
interference. CLSA report said, China in the areas of corporate governance
problems are most prominent: First, the state is the largest shareholder, which
makes the political agenda of most priority. Second, China has released few
announcements on corporate governance or annual report of China's best corporate
governance does not create a strong sense of urgency and intent. Third, Chinese
companies do not have the right, there are encouraging managers reward and
punishment mechanism. Fourth, the relationship with investors not close.
Fifth, there is no independent board members and chairman of the board, more
of their responsibilities is to manage the business rather than supervise the
enterprise. Although most private companies serving the company's founder and
controlling the company's highest level, but state-owned companies Many of the
senior managers or appointed by the government. Most board size is too large,
too many members, no real power.
Stock Exchange listed companies in China,
mainly by government-controlled state-owned enterprises from the lack of
non-administrative board, the company's internal management of the operation is
not to be firmly in control, is firmly controlled by the government, according
to a 1995 Securities Trading Center in Shanghai and Shenzhen securities trading
center over 600 companies listed on the survey do the survey, three countries
holding mm Group, corporate and individual shareholders - were holding 33% of
company stock. This rules, the state and legal person shares can not participate
in the circulation as long as home businesses and corporate joint master control
status, non-transferable equity interests, the two securities trading centers
play a trading company can not control (not just the sale of the company
usufruct) role, the Government still has not disputed control.
China and
India are the gaps in corporate governance affect the operation of the two stock
market Indian stock market returns have been higher than China's. three an
American economist Randall Mock (Randall Morck), Bernard Yeung (Bernard Yeung),
and I Wayne (Wayne Yu) wrote in a famous paper that, in those of corporate
governance is poor, information disclosure poor, minority investor protection
measures for poor countries, the securities trading center of the listed
company's stock price movement rather than a separate exercise in line,
according to their calculations, China's score of 0.8, which means that 80% of
the stock in line movement, while India's score of 0.695, in contrast, the
world's best stock market relatively low scores, the U.S. score of 0.579.
to
explain why India can attract a large number of outsourcing business, we must
first explain outsourcing and the distinction between foreign direct investment.
Foreign direct investment is an equity arrangement (equity arrangement), through
which a foreign company to gain control of a domestic enterprise, domestic
enterprises overseas enterprises to become part of an offshore business
subsidiaries or branches. Outsourcing is a contract manufacturing arrangement
(contract production). In the case of contract manufacturing arrangements,
foreign enterprises to domestic enterprises under the orders (product order),
orders of domestic enterprises according to the required quality standards,
instructions and patterns production from the main supply arrangements in the
contract manufacturing arrangement, foreign enterprises and domestic enterprises
are two separate entities.
invented a lot of people think that Indian
outsourcing companies, outsourcing companies will actually push the East Asian
international stage. 20th century from the 1950s until the 1970s, Japan, Korea,
Taiwan and Hong Kong's garment and textile enterprises through contract
manufacturing arrangements in this way dominate the global garment and textile
production .20 In the 1980s, Taiwan's clothing, leather, fur, timber bamboo 90%
of export products through contract manufacturing arrangements, only 10 percent
dependent on foreign direct investment in the equity arrangement, while in
China, the outsourcing of these industries, only about 20%.
chapter in my
book detailed explanation of why China and other East Asian economies different,
did not choose outsourcing production arrangements, but it relies on foreign
direct investment in China, the role of foreign direct investment is that it is
the largest credit restricted private funding, which is foreign direct
investment and outsourcing the production of a key difference: only product
outsourcing orders, but foreign direct investment in both orders and provide
products provided funds product itself is not a money order, it is only a future
commitment to funding a < br> This is why outsourcing this mode of
production requires an efficient financial system as a support. entrepreneurs to
order, he still needed working capital from other sources for production. there
is no efficient financial system determines the entrepreneurs He has timely
access to needed working capital .20 1960s and 1970s in South Korea, Taiwan and
Hong Kong, small business owners as long as you can get orders to get loans from
local banks, sometimes in the order as collateral, which is why outsourcing this
business models to open a large scale in East Asia, while in China, serious
discrimination in the financial system under the premise of private
entrepreneurs, foreign direct investment has a strong advantage, because it
provides product orders and to provide funds. In an unreasonable financial
system, foreign direct investment for entrepreneurs to reduce the dependence of
the country's financial system.
outsourcing success in India because India
has a more efficient financial markets. on this issue, I also below To
elaborate, but I will comment on the views of India, another error mm is not
open to foreign investment that India in fact, the Indian financial sector in
China to be much more open than we in India in the 1993-1994 financial year to
open measures have been reached in 2006, China committed to financial
liberalization measures, including direct foreign commercial banks to develop
financial services and allow foreign investment in India stock market investment
should be pointed out that India has always been open to both internal and
external, as we open internal limits in the 1990s, India's best banks are
foreign banks. Today, India's best bank is a local private banks.
India's
banking reform started much earlier than China, while it is not out of the
government active policy, but under pressure. It can be seen between the two
countries is an interesting difference in India's banking reform is one in 20
occurred in the early 1990s driven litigation depositors, depositors requested
the then dominant state-owned banks to disclose their credit standards.
depositors that banks in a variety of non-performing loan ratio continued to
improve, and damaged as the interests of depositors.
It is because of the
litigation, banking and state-owned banks clearly and openly began to provide
credit standards, thereby increasing transparency in China, such a thing had
never happened before, it is difficult to imagine that will happen.
the
World Bank's World Business Environment Survey Design (World Business
Environment Survey ) provides some very powerful and very descriptive basis. The
purpose of the survey is to understand the business operations for its views on
the business environment.
it is an important feature of entrepreneurial
companies focused on these The vast majority of enterprises in private
enterprises, only 12% of the enterprises are state-owned.
Thus, the survey
reflects the business environment of private enterprises rather than the overall
business environment survey carried out between 1999 and 2000, covering 81
countries, more than 10,000 business and it is the first time also includes the
investigation of China and India, which is also one of its major advantages,
which allows us to directly compare the two countries.
help the World
Business Environment Survey description of financial market conditions in India
some of the substantive differences that include information on corporate
finance, credit validity of many problems, of which there is a question: scoring
corporate financing environment. financial constraints of this surprising fact
is reflected in two aspects: One is not only ranked lower than India, China
Austin Jackson
Jersey, and lower than in many countries, China in the 81 countries ranked
No. 78. three ranked in the financing restrictions lower than China's state are:
Ukraine, Moldova and Kyrgyzstan. The second is with India, the Chinese have much
larger banks. instance, according to World Bank statistics, 2001, domestic
credit provided by banks proportion of GDP
Lou Brock Jersey,
China is 132.7 percent, while India is only 53.8%. It seems that China's banking
sector provides 2 times the loan in India, but China's private enterprises still
face more financial constraints World other parts of the business environment
survey also confirmed this. For example, the survey of Chinese enterprises,
business investment in fixed assets, retained profits accounted for 56%
financing; in the survey of Indian companies, this ratio was only 27 %.
there is a startling statistics that despite the scale of China's banking
sector is much larger than India, in the survey of Chinese enterprises, provided
by local commercial banks, only the total fixed asset financing 9%; and Indian
companies in the survey, this ratio reached 22%, with an interesting phenomenon
is that although Chinese and Indian companies are facing financial constraints,
although to different degrees, resulting in very different reasons for these
restrictions World Business Environment Survey on the reasons for the
difficulties caused by the financing companies ask for investigation and it
provides five reasons for respondents scoring: (1) collateral requirements; (2)
Bank procedures; (3) high interest rates; ( 4) a special relationship with the
bank; (5) Bank lack of loanable funds in the four options, the Chinese banks
actually score higher than India's banks. instance, the Indian companies in the
survey, 50.5 % of enterprises believe that the collateral requirement is
financing a (81.2%) and the need for a special relationship with the bank (35%)
In contrast, Chinese companies on the reasons given in the three scores were
29%, 35.4% and 25.3%.
Indian enterprises lag behind banking system
complaints are common in developing countries in these countries, the bank's
risk assessment is poor, and the lack of information on potential customers. In
order to be safe, they are often made of high collateral requirements, but
impose onerous bureaucratic conditions, and the implementation of high interest
rates to reduce the risk of a mature banking system to avoid taking the blunt of
the business means, for example, the World Business Environment, noted that U.S.
companies face fewer financial constraints than the Indian companies Many,
therefore, Indian companies is subject to restrictions in credit for technical
reasons, while the technology-based limitations in developing countries with
underdeveloped banking sector is very common. Bank of India's problem is not a
constitutional issue but a development countries face common problems and
typical.
our banking system should be developed and biased towards the
banking system to distinguish, as mentioned above, compared with Indian
companies, mortgage-backed Chinese companies requirements, bank paperwork, high
interest rates and less complaining about a special relationship with the bank
in fact, within the context of China's four points better than the United
States, but this data is difficult to arrive at a Bank of China, the quality of
more than U.S. banks High conclusions. A more reasonable explanation is that,
until 199 ...