Sri Lanka among four preferred destinations for Chinese FDIs

* Chinese companies urged to invest here, Brazil, Malaysia & US


Chinese companies were called on to increase direct investment in Sri Lanka, Brazil, Malaysia and the US by the country’s top think tank the China Centre for International Economic Exchange.

"Using the nation’s foreign exchange reserves to accelerate direct investment in the US will help China to limit losses from the depreciation of the dollar and may reduce the risk of a global economic recession, said Wei Jianguo, Secretary General of the China Center for International Economic Exchange (CCIEE), the China Daily recently reported.

"China’s experts from top think tanks plan to go to the US to talk about the expansion of direct investment. It will be an important and strategic decision," he said.

Zuo Xiaolei, chief economist at China Galaxy Securities Co Ltd, said that China’s foreign exchange reserves are likely to be invested in US projects for clean energy and Automobiles and a technological upgrade, all of which would boost the US industrial sector. "China can use the money to buy the stock of US companies, facilitate merger and acquisition projects and increase socially responsible investment," Zuo said.

Up to now, China has invested in 35 US States. Between 2003 and 2010, 230 investment projects came from China and were worth a total of approximately $11.7 billion, according to Zuo.

"However, China’s direct investment only accounts for 0.1 percent of all Asia-Pacific outbound investment in the US," Zuo said.

Standard & Poor’s downgraded the US long-term sovereign debt rating to AA+ from AAA on August 5, prompting concerns that the global economy may experience a double-dip recession.

According to China’s Ministry of Commerce, the nation’s non-financial outbound direct investment increased by 3.3 percent year-on-year to $27.6 billion between January and July. However, investment in the US has shrunk, indicating investors’ concerns over the country’s prospects for economic growth.

The global economy is expected to slow over the long term as a result of the ongoing sovereign debt crises in the US and the European Union, which will make growth difficult in China’s manufacturing sector, said Wang Tianlong, a researcher at CCIEE.

"The central bank can transfer the foreign-exchange reserves to commercial banks and Chinese companies can borrow the money to invest overseas," Wang said. In addition to the US, Sri Lanka, Brazil and Malaysia are also good investment destinations, he added.

China biggest lender in 2010, FDI picks up

China was Sri Lanka’s biggest lender in 2010 with loans amounting to US$ 821.4 million (while grants amounted to US$ 7.5 million), followed by India (US$ 483 million), Japan (US$ 396.6 million ), ADB (US$ 366.7 million), World Bank (US$ 347.4 million), Russia (US$ 300 million), Iran (US$ 111.2 million), Australia (US$ 105.2 million), Saudi Arabia (US$ 46.1 million), according to data from the Ministry of Finance and Planning.

In 2010, China accounted for 39.8 percent of total foreign finance disbursement, followed by Japan (15.7 percent) and ADB (14.4 percent).

Earlier this year the government said that China would provide Sri Lanka with US$ 1.5 billion over the next three years to develop infrastructure in the post conflict. The funds are to be used to construct roads, bridges, water supply schemes and also for irrigation and power.

As far as FDIs are concerned, India topped the list with US$ 110 million in 2010, followed by Malaysia US$ 72 million and the UAE US$ 66 million. Total FDI amounted to US$ 516 million that year. This August, China Merchant Holdings and Aitken Spence committed to the country’s single largest foreign investment deal when it entered into an agreement with the Sri Lanka Ports Authority to design, build and operate a container terminal in the expanding Colombo Port. The consortiums investment would total US$ 500 million.

animated gif
Processing Request
Please Wait...