Facts and Policies China s Overseas Investment Economic

Facts and Policies: China’s Overseas Investment & Economic Cooperation Chen Wenlin Ministry of Commerce (MOFCOM)

Part 1 About Myself and Mofcom l Warm welcome ! l Chen Wenlin, used to work and study in Zimbabwe, Israel, Australia, Micronesia. l Department of Overseas Investment & Economic Cooperation, Mofcom

Part 2 Topics for Today l 1, The main forms and statistics of China’s l FDI and Economic Cooperation l 2, The Chinese non-financial outward FDI l 3, Overseas projects contracting/labor l services l 4, Chinese government policies l 5, Q&A

Part 3 Main Forms of Chinese Foreign Economic Cooperation in 2009 l Foreign direct investment to abroad 56. 53 billion US$, +1. 1% Non-financial FDI: 47. 8 billion US$ , + 14. 2% Financial FDI: roughly 8. 73 billion US$, - 37. 9% l Chinese overseas projects contracting Turnover value at 77. 7 billion US$, + 37. 3%. l Chinese labor services abroad Turnover value at 8. 91 billion US$, + 10. 6%; By end of 2009, 778 thousands Chinese workers in abroad

Sum of the 3 main forms. Total sum: l l 2009: 56. 53+ 77. 7+8. 91=143. 14 bil. US$ 2008 : 52. 15+56. 6+8. 06=116. 81 bil. US$. 2007: 73. 88 billion US$. World outward FDI in 2009: total 1114 b US$ USA 248 b US$; France 147 b, Japan 75 b, Germany 63 b, China 56 b, Chinese HK 52 b.

How to classfy our Project Contracting ? l If we put BOT form of project contracting as investment, our total outward FDI will be close to 143 billion US$ in 2009, ranking just after that of the France (147 b) and the USA in the 3 rd place. l Many projects contracted are backed by the preferential or commercial loans.

Part 4 Features and Statistics of Chinese FDI abroad

1. High annual growth rate

2, Invest in 177 countries in 2009 Chinese investment in 177 countries or regions, in 10891 enterprises with a total asset value of 1076. 6 billion US$; l Main 15 destinations: l Chinese HK, Cayman Islands, Australia, Luxembourg, British Virgin Islands, Singapore, USA, Canada, Chinese Macao, Myanmar, Russia, Turkey, Mongolia, Korea, Algeria. l

3. Merger and Acquisition l 19. 2 b US$ or 34% of the Chinese overseas FDI in 2009 are through Merger and Acquisition. Why this form? l Investment barriers and risks, work visa and permits, labor union, market entry and national treatment. l We need brands, sales channels, and their R&D. l

4. High profit reinvestment l In 2009, Chinese FDI profit reinvestment amounted to 16. 13 billion USD, 28. 5% of the 56. 53 b US$ total. l Why? l Chinese huge foreign exchange reserve, 2. 6 trillion by Oct. of 2010. Relaxed restrictions.

5. FDI in main sectors 2009 l Leasing and business service, 20. 47 b US$ or 36. 2% l Mining, 13. 34 b US$ or 23. 6%; l Financial FDI, 8. 73 b US$, or 15. 5% Retailing and wholesale, 6. 14 b US$ or 10. 8%; l Manufacturing, 2. 24 b US$, or 4%; l Agriculture 0. 6%. l

5. Who are the main investors l 78. 5% (2007) and 85. 4% (2008) and 80. 2% (2009) are invested by the large or leading corporations; l Guangdong, Shanghai, Jiangsu, Shandong, Beijing, Zhejiang.

Part 5 Overseas Projects Contracting

1, Chinese overseas projects contracting turnover value, 1993 -2008 (unit: US$ 100 million)

2, Geographic distribution of China’s overseas projects contracting in 2008

3, Main markets for the Chinese projects contracting business. l l 2009: India, Algeria, Angola, Sudan, Saudi Arabia. l l l 2008: Indonesia Algeria Angola Sudan Saudi Arabia 7. 4% 5. 7% 4. 6% 4. 3%

Part 6 Overseas Labor Service Turnover value at 8. 91 billion US$. l By end of 2009, 778 thousands Chinese workers in nearly 200 countries. l Mainly in construction, textile, sailor, nurses, l Labor’s interests protection, a big challenge to us. Salary, security, training, insurance. l

Part 7 Chinese Administrative System Ministry of Commerce and other ministries Government Provincial Departments Municipal / County Departments Chambers / Agencies 6 Imp-Exp Chambers and China Investment Promotion Agency Diplomatic Missions Commercial Offices under the Chinese Embassies and Consulates

Part 8 Chinese Policies A, Management policy A 1. Management Policies on overseas FDI 1, FDI check and permit system l Friendly and safe environment; bilateral relations; host countries policy and priorities; investors’ social responsibility; l Investors are the decision makers. 2, Pre-reporting requirement on M&A cases.

A 1. Management Policies on overseas FDI 3, Reports on host country investment barriers; 4, Annual evaluation and checking system; 5, Embassy reporting and joining the Chinese chamber of commerce requirement;

A 2. Management Policies on projects contracting 1, The 1 st legal regulation: China overseas projects contracting management regulation; 2, Qualification system: expertise, capital, record experiences, 3, Work safety monitoring system; report and statistics requirement; 4, Punishments on illegal sub-contracting, bribery and safety accidents;

A 2, Management Policies on projects contracting 5, For project contract value over 5 million US$, bidding permit system by coordination and nomination through industrial associations; Why we need permit and coordination ? Rule : Open and fair competition, qualification background, national reputation and interests, First come first.

A 2, Management Policies on projects contracting 6, Mofcom issues bidding permit; Contract value over 5 million US$ or in countries without Diplomatic relations, Cross border with a 3 rd countries; 7, After the above, Go to banks for prepayment bank guarantee, implementation bank guarantee.

A 3. Management Policies on labor services 1, Labor services qualification system; 2, Financial deposits for emergency rescue policy; 3, Training before going system.

B. Support Policy B 1, Financial policy A, to encourage investors to spend more on : Life insurance; Market research and investigation; R&D patent registration, l Natural resources transportation and insurance, labor and personnel training. B, Loan subsidiaries: Not more than the actual interest rate from banks

B. Support Policy B 2, loans policy Buyer’s credits loan : Sovereignty buyer; signed contract value over 1 million US$, Chinese export ships and machine content over 50% , importer pay 20% on sight cash payment, guarantee and export insurance. 10 years with agreed rates plus management fees.

B. Support Policy B 3, Chinese Government Fund Program l Chinese Government Preferential loan to LDCs. l Free or low interest rate, l 20 years long term, l Mostly for social and infrastructure projects in less developed countries.

B. Support Policy B 3, Chinese Government Fund Program l China Investment Fund: l 1, 10 b US$ to ASEAN in 2008 through Ex. Im Bank; l 2, 10 b US$ to Africa in 2008 through National Development Bank. l 3, Bilateral loans to Mid. Asia and Latin America.

B. Support Policy B 4, Special loan for the development of African SMEs Chinese premier Wen jiabao announced the new 8 measures at the 4 th ministerial meeting of Forum on China-Africa Cooperation in 2009. l 2010 -2012, 1 billion US$, with tenor of no more than 5 years, l On-lending through African financial institutions or direct loan to local enterprises or Chinese. African joint ventures. l

B. Support Policy B 5, Information services 1, Investment environment bulletins and host countries policies and laws; 2, Projects bidding information bank; 3, Fairs and economic forums, i. e. China ASEAN; China Africa, China Pacific Islands. 4, Training and HR development services

C. Bilateral protection protocols l Joint committee with 129 countries and 13 international organizations; l Investment countries; protection protocols with 130

C. Bilateral protection protocols l Free trade agreement with Chile, ASEAN, Pakistan, New Zealand , Chinese HK and Marco; l How about the effects of FTA ?

Part 10 Thanks, Q & A Telephone: 010 -65197503 Email: chenwenlin@mofcom. gov. cn www. fec. mofcom. gov. cn