China offers ‘enormous but risky’ investment opportunities

Tokyo, November 30:

China offers lucrative opportunities for foreign companies looking to take over local firms but Beijing needs to open up further if it is to attract investment, experts said today.

“The opportunities are enormous,” said Kenneth Davies, senior economist at the Organisation for Economic Cooperation and Development (OECD). “But the opportunities can only really materialise if there are changes in the institutional framework,” he told a seminar on investing in Ch-ina. Davies said Northeast China, for example, had lots of state-owned, inefficient industrial companies.

“They have a lot of capital. They employ a lot of people. They’re often making things that nobody wants to buy, using technology that is outdated.” The firms had some able workers but often the management was less proficient and their balance sheets were often mired in debt.

“I was given a bundle of 100 sheets of paper in Changchun (in northeast Jilin province) by the local government.” They said. “Help. Please find some foreign investors to bring us new technology, new management methods’. And they didn’t say ‘to pay off the bank debts’ but that was pretty obvious,” said Davies.

The Paris-based OECD has called on China to make the rules and regulations for cross-border mergers and acquisitions (M & A) more open and transparent to attract more and better foreign investment. “China can benefit from more open policies on M & A. We’re encouraging a much more open approach,” said Davies.

China was gradually become friendlier to foreign direct investment but firms should not expected swe-eping changes overnight, the forum heard. “China is a country that is being opened up to the world,” said Akira Furuya, who heads a China research institute within the Japanese trading house Itochu Corp.

“All-at-once opening up will not be suitable for China because China is too big,” he said. “Transparency is key for foreign investors. However, transparency is lacking in China. We do not know what is happening in Chinese companies.”

$300m ADB loan

MANILA: ADB is providing $300m to help build a railway line linking its prosperous coast to less developed western interior areas, the Philippines-based lender said. The 944-km project will be the first line connecting Shanxi and Shaanxi provinces and the Nin-gxia Hui autonomous region. It would also be the shortest east-west corridor linking Beijing, Huanghua, Qingdao and other major cities and ports in the east to Yinchuan, Zho-ngwei, Lanzhou and Urumqi on its way to Kazakhstan. — AFP