Smart in and smart out

Cheming Yang
China has very tight regulations on foreign exchanges. It used to be there were more restrictions on cash that flows out than that flows in. This phenomenon happens against the background of a developing country that is in need of capital infusion. However, time has certainly changed.
According to the Statistical Communique of 2012 on China Direct Investment Overseas, outflow increased against trend, and hit a record high. Chinese direct investment overseas hit a record high of US$ 87.8 billion in 2012, up by 17.6% year-on-year, while global direct investment fell by 17%. Another healthy development is that the outflow capital has contributed to substantial economical activities rather than pure monetary games. For instance, investment in USA saw a rapid growth, while investment in Virgin Islands and Cayman Islands declined significantly. Total taxes paid by overseas Chinese enterprises to the invested country in 2012 were over US$ 22.16 billion, and employees in overseas enterprises totaled 1.493 million by the end of 2012, of which 70.9 million were foreign employees. The recent announcement of the acquisition of Smithfield Foods by Shuanghui International is another concrete example of this trend.
In the first issue of this year, we talked about responsible corporate global citizens. Leading Chinese international companies are actively developing corporate citizenship efforts as they expand their global footprint, according to the report released in 2012 by the World Economic Forum. The report also gives examples of how Chinese globalizers are aligning their profits with real and lasting contributions to the local communities in which they operate. And we observe the same trend from the results of 2012 foreign direct investment and the M&A of Smithfields as well.
However, the essence of investment does not lie in securing global citizenships. The essence is still return on investment (ROI). Foreigners will not come to China if the prospect of ROI is bad. Neither shall Chinese enterprises go abroad if they do not expect decent ROI. In the end, healthy inbound and outbound investment that combine the balance of ROI and corporate global responsibilities is beneficial to both Chinese and global economies.


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