Competing for China: NZ needs to trade up to an investment relationship

Global CEOs rate China as the world’s top destination for foreign investment, which is consistent with its significantly expanding economy, according to a global survey by PwC and the China Development Research Foundation.

Competing for china PICThe survey ‘Choosing China: Improving the investment environment for multinationals’ found more than half (56%) of CEOs surveyed chose China above other major and emerging economies including Brazil, Russia, India and the US.

Worldwide CEOs say they were attracted to China’s expanding consumer markets, skilled talent pool and government incentives.

“China attracted NZ$133.8 billion (US$111.7 billion) of foreign direct investment in 2012 from multinationals seeking to tap into Chinaƕs success,” says PwC New Zealand Partner and China Sector Leader Colum Rice.

“China’s economic transformation is absolutely dependent on its ability to continue to attract foreign investment. Yet, it faces new challenges as emerging markets become more competitive. Over recent years, we have seen increasing levels of Chinese investments into New Zealand but what the survey highlights is the emphasis that China is placing on attracting inbound investment. This brings into sharp focus the increasing level of competition which New Zealand faces for foreign direct investment,” adds Mr Rice.

The survey found less than 10% of CEOs from smaller companies (operating in less than five countries) have operations in China.

“China now needs to promote itself as a place of opportunity for smaller and more specialised businesses to keep the investment renminbis flowing in. All the low hanging fruit is gone and this places Kiwi businesses in a strong position.

“New Zealand needs to work hard at selling the benefits we can offer growth hungry China, in terms of the innovation we can bring and financial capital we can help attract.

“For Kiwi companies with the IP, brands, relationships and knowledge Chinese businesses crave, a partnership could offer a first step into global trade, as well as opening doors to other global markets,” says Mr Rice.

According to the survey, CEOs highlighted a drive to increase domestic consumption (48%), deepen financial reforms on foreign exchange and interest rates (43%), and doubling per capita incomes by 2020 (41%) as the top three policy commitments that would have the greatest impact on their businesses.

“The Chinese Government recognises it needs to make reforms to stay competitive as a destination for foreign investment if it is to achieve its goal of transitioning from a ‘made in China’ to a ‘designed in China’ consumption-driven economy,” says Mr Rice.

“Seventy percent of CEOs who have operations in China say they are planning to increase their investments, which should give New Zealand businesses confidence China is a wise market of choice,” adds Mr Rice.

When asked about further measures to improve China’s competitiveness, CEOs highlighted improving government transparency and anti-corruption (73%), reducing economic intervention (53%), and speeding capital market reforms (30%) as areas for further improvement.

“As China moves up the value chain and partners more with the global community, we can assume the influence and need to work with others will drive China’s continued reforms.

“China is such a fast growing and dynamic market. New Zealand’s political and trade relationship countries around the world are focusing on China and the inbound and outbound investment opportunities. We need to move fast to transform into long-lasting investment partnership or we risk missing the opportunity,” concludes Mr Rice.



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