GlobeSt.com: What type of interest are you seeing in China from businesses outside the country?
Tang: Besides the traditional manufacturing, automotive, petrochemicals and electronics, in the past five years China has opened its doors to financial services. Before that it was a very closed-door and protective society. Now the Chinese government has opened its front gates, so to speak, to the insurance and tourism industry. We see names like Marriott International, Accor and Carlson Hotels. There are also call centers in Dalian for companies such as SAP, Bearing Point, GE, Accenture and IBM. Overall, foreign companies committed more than US$28 billion in service-company investments in 2003, a 49.7% year-over-year increase compared to the 36.2% increase in contracted foreign investment targeting manufacturing. This change in foreign-investment trends is being driven by companies wanting to capture opportunities generated by China's fast-growing middle-class consumer market. People are getting paid better and have more disposable cash.
GlobeSt.com: This of course has contributed to the rise in development we hear so much about, correct?
Tang: After the cultural revolution, which ended in 1977, the doors started gradually to open. A lot of people were still skeptical about China's administration, but the action started to really take place when China attained WTO status and Hong Kong returned to China. All this promoted the region in the international arena. It affected a lot of medium-size companies coming into China, particularly Shanghai and Beijing. Increasingly, Beijing is shedding its political image and catching up in terms of the commercial sector. Also, China got the 2008 Olympics in Beijing and all this garnered international confidence.
GlobeSt.com: Is the Olympics spurring a lot of development in Beijing?
Tang: Beijing is like a patchwork of construction. You see the building cranes everywhere and, more so, the local developers are building residential and office projects in the CBD; that's the place earmarked for the commercial hub of Beijing. That's why I say Beijing is shedding a lot of its political image. It's getting commercialized. Before that it was Shanghai, which was a commercial center. It used to be one of the big four financial centers back in the 1920s and 1930s. Beijing is catching up and building a lot.
GlobeSt.com: Where is the interest coming from, Europe or the United States?
Tang: Both actually, and we're seeing an increasing amount of investment from Asian corporations. Total contracted foreign direct investment in 2003 was $115.7 billion while FDI was $53.5 billion. Jiangsu, Guangdong, Shandong, Shanghai and Zhejiang, in that order, were the leading recipients of FDI, garnering 65.14% of all inflows. In 2004, FDI reached $60.63 billion, which was a growth of 13%. China approved a total of 43,664 new foreign-investment companies in 2004, up 6% from 2003. So China's accumulative FDI totaled nearly $1.1 trillion by December 2004. Out of that, $562.1 billion has been materialized. The breakdown from other countries, based on the 2003 figures, is Hong Kong at $17.7 billion, British Virgin Islands at $5.8 billion, Japan at $5.1 billion, South Korea at $4.5 billion and the US at $4.2 billion.
GlobeSt.com: Why should other countries venture into China?
Tang: China is a huge domestic market. There are a lot of opportunities and money to be made. It tops most corporate agendas these days; no one ignores a country that's just become the third-largest exporter in the world. Using the PPP method of calculating GDP, China is already the world's second largest economy, accounting for 13% of global output.
GlobeSt.com: What roadblocks, if any, are there for doing business in China?
Tang: Rapidly changing market dynamics, lack of regulatory transparency and frequent policy shifts make China one of the most difficult markets in which to achieve commercial success. Besides the central government in Beijing, each province--or city--essentially has its own decision-making authority. Also, it is exhausting to catch up with the amount of changing legislation. And, of course, the particular thing the US has been yelling about, there is no international property rights protection.
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