In terms of aggregate dollars, foreign investment into China exploded around 2006 and remains near a peak.
Yet this chart from China Daily shows how the number of new foreign companies has fallen year and year since 2005. The chart below can differ in trend from the chart above because the chart above includes new investment by established foreign companies in China.
Thus it appears as if established foreign players are investing in the country, but the number of new foreign players is dwindling. Are companies becoming gun-shy to invest in China at this stage? Is it becoming more difficult to become established?
China expert James McGregor thinks this may be a function of an increasingly difficult investment environment.
“You have a time now where there are a lot of local governments protecting their local companies and discriminating against foreign companies. The foreign business community certainly feels that way,” he added.
McGregor says the immense power of China’s State-owned enterprises can make life very difficult for anyone wanting to do business in the country.
“State-owned enterprises are very powerful. They have access to capital and they have the relationships here that bring them a lot of business opportunities. I think even some Chinese private entrepreneurs have concerns about the recent emphasis on State industry,” he said.
And.. does this augur a coming drop in China’s net foreign direct investment?
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