Space For Rent

Space For Rent
Tuesday, April 7, 2015, Chaitra 24, 1421 BS, Jamadius Sani 16, 1436 Hijr

Uncertain fate of US investors in China
Published : Tuesday, 7 April, 2015,  Time : 12:00 AM,  View Count : 48

Xinhua news agency from Washington has reported that concern is being created that foreign investors may massively leave China as some of them have already closed theirs. This story, as a general practice, could be catered first by some western news agency such as the Reuters, the AFP or AP. But Chinese news agency itself has diffused the information that proves the genuineness of the event and magnitude of the negative impact that may befall.
China in a recent IMF measure has superseded the US and become the number one economy in the world in consideration of purchasing power parity (PPP). Foreign investment had definitely a role in her becoming as number one and when some of them have wound up and many others may follow suit her position in number one may not sustain long. In view of the existing position she has rightly become ambitious and sponsored an International Development Financing Institution called Asian Infrastructure Investment Bank (AIIB) where her initial funding will be 500 billion US dollar. Thirty countries of different continents, including Bangladesh, have given option to join the bank. If Chinese economy is hurt by the winding up of some or many foreign investors the proposed bank will also face a setback.  
Why some foreign investors have withdrawn and others are apprehended to do so is a many-faceted factor. Larger chunk of the foreign investment has gone to the service sector of labour incentive nature. Sixty per cent of the total FDI went to the service sector and annual increase in the sector was 30 per cent. On the other hand, 33 per cent went to the manufacturing sector and the annual increase was only seven per cent. Now, the labour incentive service sector is facing the problem of high cost of labour which made their enterprises less remunerative and may also be subject to the elasticity of demand which at the initial years was easy expansive. Even if the country may stand above the US in purchasing power parity but what is the level of purchasing power of the world's largest consumers needs to be assessed.
China is thinking of changing of its economic theme. So long its economy was export based but it now wants to rebalance it by creating higher demand in its own society. There is significant message in the matter. Till now Chinese workers have sacrificed much to produce to boost her exports in exchange of poor pay, now their leaders are thinking to give them more ability to consume a little more to improve their quality of life. Earlier, they were oriented to sacrifice or deprived of which may now being thought to be compensated.
The US investors have not given up hope. They in all possible ways are trying to stay and attain sustainability, though of course some members of the US chamber of commerce in China have already left the country in 2014 and some others are contemplating to do so. But generally US Research Institutions are conducting studies to evolve ways to help companies to sustain and become profitable. They are relying on two factors: One? to make China agree to invest in those areas where value addition is higher which possibly is now wanting. Two? more people will emerge with ability to consume.
The US is now negotiating with China a Bilateral Investment Treaty (BIT) whose future though is not certain yet. The circumstances obtaining in both countries and in the glob at large indicates that a treaty may ultimately be signed and that will hopefully be beneficial to the entire world.

Editor : Iqbal Sobhan Chowdhury
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