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FDI: It’s a Big Deal

I have recently written [1] (and spoken [2]) about China’s two faces for foreign direct investment (as well as challenges for privatisation and private equity [3]), so it is with interest that I read news of some more big deals – from Intel on the one hand, and Arcelor Mittal and Saudi Basic Industries on the other – that have caused very different reactions in government circles:

China still wants foreign direct investment, but it does not view it in the same way it used to. Right now it is all about technology and added-value rather than dollars and cents. And of course, there is the strong desire to protect strategic sectors of the economy, as well as local brands that may have global ambitions. As Andrew Hupert at Diligence China [5]said in response to an earlier post on attitudes to FDI: “The honeymoon’s over, but the marriage is solid”.

Another perspective on this issue (citing Carlyle and Telstra deals), has been written at All Roads Lead to China [6], and is well worth a read.

The overall message from these stories is that foreign investors should be sensitive to the concerns, and strategic development plans, of the Chinese government and local incumbents. Patience, a low profile, and political due diligence and lobbying, may not suit all big boardroom types, but they are recommended for anyone that wants to buy into the China market in a big way.

See news sources: