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VI-12 Question: In recent years, several transnational acquisition cases involving Chinese companies have attracted worldwide attention, making some draw the conclusion that China had countless capital to invest in the world. Will China's overseas investments pose threat to the destination countries and the local companies? Will China become a major investment country?

A: The transnational acquisition cases indeed caught the attention of the world and the major media from some developed countries also gave it a large amount of coverage. It gave people a false impression that China had already become a big investment power and had a huge amount of money to invest in the world. Actually, those remarks were exaggerated, especially by the media.

There is an international standard to judge whether a country is a big investment power- the proportion of absorbing and using foreign investment and its investment abroad. Currently, the proportion is mostly 1 to 1.2-1.4 in developed countries, while the proportion is 1 to 0.2-0.4 in developing countries. In the 27 years after China started its reform and opening up policy in 1978, China has invested a total of US$51.7 billion abroad by the end of 2005, equaling Germany's or France's foreign investment in one year. China invested over US$6.92 billion in 2005-the biggest amount, but the paid-in foreign capital to China in that year was US$60.5 billion. China's foreign investment cannot reach the average level of developed countries. Therefore, China is not a big foreign investment power and it is not true that China is going to grasp foreign markets or threaten some countries or companies.

Of course, with economic globalization and rapid economic development, more Chinese companies are going into the international market and increase their investments overseas. Statistics show that from 2001 to 2005, China's investment in foreign countries increased 26 percent, 25 percent, 110 percent, 78 percent, and 80 percent year on year respectively, which means that China's investment abroad is increasing steadily and fast. In 2006, Chinese companies directly invested a total of US$16.13 billion abroad, climbing 31.6 percent compared with the previous year. By the end of 2006, China had invested US$73.3 billion abroad (excluding the financial sector), and had set up over 10,000 companies abroad. China extended its investment from export of general trade, food and beverage and simple processing to marketing and sales network, aviation and logistics, resource development, manufacturing, design, research and development. In the meantime, China had also extended investment from developed countries or regions like Europe and the United States to over 160 less developed countries in the Asia-Pacific region, Africa, and Latin America. China's international ranking in terms of foreign investment rose to 13th in 2006, up from the 17th in 2005.

In the next few years, the Chinese Government will further perfect relevant rules and regulations regarding foreign investment and make it more convenient for Chinese companies to invest abroad. It is estimated that by 2015, China's GDP will grow to US$4 trillion with per-capita GDP reaching US$3,000. By that time, China could be a major foreign investment power and breed several very competent multinational companies. It will be conducive to the development of national economy, bring more opportunities for cooperation with countries around the world, and promote regional economic cooperation and the common development of all countries


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