Foreigner Open Bank Account Malaysia

Inward foreign direct investment in China and its policy context.

INTRODUCTION

From the establishment of the People’s Republic of China in
1949 to the adoption of economic reforms in 1978, there was almost no
foreign investment in China. In the 1980s, experiments with joint
ventures resulted in a trickle of FDI inflows dominated by the
relocation of most of Hong Kong’s manufacturing to South China.
Inward Foreign Direct Investment (IFDI) first topped USD1 billion in
1984 and by 1991, was USD4.4 billion. (1) With new urgency given to
foreign investment attraction at the beginning of 1992 and the formal
establishment of a market economic system in that year, IFDI inflows
accelerated rapidly, reaching USD11 billion in 1992, continuing up to a
plateau of USD45 billion per year in 1997-1998. Following a decline to
around USD40 billion a year in 1999-2000, and after China’s
accession to the World Trade Organization (WTO) in 2001, FDI inflows
have continued to rise steadily. (2)

By 2009, China had accumulated an IFDI stock of USD473 billion (3)
(Table 1), well ahead of other large developing and transition economies
such as Brazil, with USD401 billion, India, with USD164 billion and
Russia, with USD253 billion (Table 1). From 2000 to 2009, China received
larger FDI inflows than any other developing or transition economy,
reaching a record USD108 billion in 2008. By comparison, 2008 IFDI flows
to Brazil were USD45 billion, to India USD42 billion and to Russia USD70
billion. In 2009, China’s IFDI fell to USD90 billion as a result of
the global economic crisis, while Brazil’s fell more sharply to
USD26 billion, Russia’s to USD39 billion, and India’s to USD35
billion (see Table 2). China’s FDI inflows recovered strongly in
the first eight months of 2010. The relatively good performance of IFDI
into China during both the Asian crisis of 1997-1998 and the current
crisis reflects international investor perceptions of China as a
reliable risk-avoidance haven.

Partly because of China’s WTO commitments to a phased
opening-up of services to foreign participation during the five years
following accession, the share of the tertiary sector in total IFDI
flows rose from 31 per cent in 2001 to 52 per cent in 2008, while at the
same time the share of the secondary sector declined from 66 per cent to
46 per cent and the always relatively tiny primary sector shrank from 4
per cent to 2 per cent. While IFDI in manufacturing rose from USD31
billion in 2001 to USD50 billion in 2008, this represented a decline in
the sector’s share of total IFDI stock from 66 per cent to 46 per
cent (see Table 3). Starting in 2002, foreigners were allowed to
participate in China’s stock markets as Qualified Foreign
Institutional Investors (QFIIs), and as their qualifications have become
less strict, an increasing number of QFIIs have set up offices in China.
Foreign banks have also expanded their operations as these have been
increasingly allowed to conduct various banking services, including
foreign currency services, for Chinese enterprises since 2002, Chinese
yuan services since 2006, and credit card issuance since 2007. At the
same time, while the burgeoning domestic market has continued to attract
manufacturers, the increase in labour costs, more recently resulting
from a wave of strikes in foreign affiliates, has prompted investors to
plan new investments in lower-cost economies such as Vietnam and
Bangladesh.

China’s IFDI appears to be mainly sourced in Asian economies.
As of 2008, 39 per cent of China’s IFDI stock was from Hong Kong, 7
per cent from Japan, 5 per cent from Taiwan, 5 per cent from the
Republic of Korea and 4 per cent from Singapore. The United States and
the European Union each supplied 7 per cent, of which the major sources
were the United Kingdom and Germany (each just under 2 per cent of total
IFDI) (see Table 4). A major obstacle to providing an accurate account
of the provenance of China’s IFDI is the high proportion circuited
through Hong Kong, and through the Caribbean and other tax havens. Hong
Kong’s matching IFDI and OFDI figures suggest that much of these
flows are pass-through to China, (4) including an element of
round-tripping, (5) though it is also important to note substantial
investment from Hong Kong in China’s burgeoning property sector. As
of 2008, Hong Kong accounted for 39 per cent of total IFDI stock, by far
the largest share. The British Virgin Islands provided 10 per cent, more
than the European Union (7 per cent), Japan (7 per cent) or the United
States (7 per cent). The Cayman Islands supplied about the same
proportion, 2 per cent, as the United Kingdom.

FDI is concentrated in China’s eastern coastal regions,
especially in Guangdong and Shanghai. (6) Guangdong’s
attractiveness as an FDI destination in the 1980s was mainly due to its
light regulation, relative remoteness from the capital, Beijing (and
therefore from central government control), its proximity to the
region’s largest port, Hong Kong, that was seeking to shed its
manufacturing sector, and the fact that it contained all but one of the
country’s special economic zones (SEZs). Shanghai, with its strong
industrial base and its advantageous location as a major port at the
mouth of the Yangtze, also drew large amounts of IFDI. A third major
development region in the old industrial heartland of North-East coastal
China has also developed. Attempts to boost FDI in China’s
less-developed interior, namely Central and West China, are continuing.
But while the physical infrastructure has been greatly improved and
lower labour costs are making the hinterland more attractive as wage
pressures mount in Guangdong, the developed coastal regions, with their
more developed business environments and local markets, remain the
largest recipients of IFDI.

THE CORPORATE PLAYERS

Many Fortune Global 500 companies are present in China. The
official list of the largest foreign affiliates by sales value in 2008
includes Nokia in second place and GM’s Shanghai offshoot in eighth
place (see Table 5). The largest foreign affiliate, Hongfujin Precision
Industry, is owned by the Foxconn Technology Group of Taiwan.

Greenfield investment dominated IFDI until the late 1990s for
reasons of policy and practicality. Before the reforms in the late
1990s, most firms were state-owned and not available for acquisition,
and there was no regulatory provision for foreign mergers and
acquisitions (M&As). In the first decade of the 21st century,
acquisition targets have become available as major enterprises have been
divested by the state, the domestic private sector has grown and
regulations governing foreign M&As have been enacted. (7) M&As
have become a major element of FDI inflows, with many medium-sized
acquisitions taking place in the past three years (see Table 6). The
rise in cross-border M&As in China has been largely stimulated by
the lure of the rapidly expanding domestic consumer market.

Recent large greenfield investments also show a tendency to focus
on China’s domestic market, but although the country’s cost
base continues to rise by comparison with regional competitors, large
investments in export manufacturing continue to be made. Recent large
greenfield investments include automobiles and automobile components (by
Daimler, Volkswagen, Yulon, Hyundai and BMW), as China has become the
world’s largest car market (see Table 7).

EFFECTS OF THE CURRENT GLOBAL CRISIS

China was less seriously affected by the global crisis than its
main trading partners. The country’s exposure to the US sub-prime
market was relatively small, (8) and the collapse of consumer confidence
in the US had a limited effect on China’s exports. (9) In addition,
the government initiated an early and rapid-acting stimulus package that
helped support continued growth. (10) IFDI flows almost certainly sank
not because of any fear of market shrinkage in China, where GDP grew by
9.6 per cent in 2008, (11) and 9.1 per cent in 2009, (12) but because of
home-country financing problems. Although no cancellations of large
foreign investments in China directly attributable to the crisis have
been made public, several foreign affiliates have suffered domestic
problems and are likely to suffer as well dampening or delayed planning
for overseas expansion.

FDI inflows to China decelerated sharply during 2008, from a rate
of increase of over 100 per cent year-on-year in January to a decline of
3 per cent in November. IFDI continued to fall over the first seven
months of 2009, picking up modestly thereafter. As a result, the annual
total shrank from USD108 billion in 2008 to USD90 billion in 2009. In
the first eight months of 2010, FDI inflows were up 18 per cent
year-on-year.

THE POLICY SCENE

Since the 1980s and 1990s, foreign investment has been welcomed by
China’s government, after three decades of autarky. Unusually for a
transition economy, the country’s savings rate remained very high
throughout the period of reform, with the saving/ investment ratio
constantly 100 per cent or higher. Yet the lack of effective financial
intermediation prevented effective mobilisation of savings for
investment. Instead, foreign investment filled the financing gap, while
bringing along new products, new production processes, modern management
techniques, and competition for Chinese firms. Initially, foreign
affiliates substituted for the absent domestic private sector.

The government’s initial approach was pragmatic and
control-oriented. Foreign investment was allowed in a limited number of
sectors and a few locations (i.e., SEZs). Two kinds of joint ventures
were permitted, as 100 per cent foreign ownership was not allowed.
Foreign affiliates had to export their entire output. China lacked the
basic elements of an institutional framework for foreign investment,
such as adequate physical infrastructure, a mobile labour force,
internationally acceptable accounting practices and the rule of law. In
compensation, China offered fiscal incentives to foreign investors in
the SEZs, including a five-year tax holiday and a halving of the rate of
business income tax. (13)

In the 1990s, as IFDI flow rose and operating conditions improved,
China relaxed many restrictions. Wholly-foreign-owned ventures were
allowed and became popular. Export requirements were relaxed and sales
to domestic consumers allowed. The ban on private car ownership was
removed. After the world’s largest consumer population became an
available market, most of the world’s largest multinational
enterprises (MNEs) set up operations in China. After these policies
spread to other coastal regions in the late 1980s, the government
encouraged investors, including foreign ones, to invest in the
country’s interior, opening up the whole country to foreign
investment. Although this policy has resulted in an increase in
investment in the country’s hinterland, most of this has
materialised in the form of government infrastructure construction.
Investors, both Chinese and foreign, continue to invest more heavily in
the Eastern coastal region.

FDI projects are screened in accordance with laws on each category
of foreign ownership, including the 1979 Law on Sino-Foreign Equity
Joint Ventures, the 1986 Law on Wholly-Foreign-Owned Enterprises and the
1988 Law on Sino-Foreign Contractual Joint Ventures. (14) In addition to
these laws, China operates a catalogue system that combines elements of
both open and closed lists. The Catalogues for Guidance of Foreign
Investment Projects are four: prohibited, restricted, permitted and
encouraged. (15) The permitted catalogue is not published.

The prohibited catalogue is effectively a negative list, detailing
sectors in which foreign investment is not permitted. The restricted
catalogue contains sectors in which foreign investment is permitted but
in which the project examination and approval process may be stricter
and take longer; it includes some sectors opened to foreign investment
as a result of China’s WTO entry. The encouraged catalogue projects
are given favourable treatment because they comply with China’s
development policies, which are focused on promoting high-technology,
capital-intensive industry, as well as development in the Central and
Western regions. Most recently, the catalogues have emphasised the green
objectives of energy conservation, environmental protection and circular
economy (i.e., a model of economic development based on the efficient
use and recycling of resources).

China has pursued some active investment diplomacy since the early
1980s, having signed 127 bilateral investment treaties (BITs) by 1 June
2010 and 112 double taxation agreements (DTTs) by 1 June 2009.16 China
is a member of the ASEAN-China Free Trade Area (AFTA), which came into
effect on 1 January 2010. From the mid-2000s, doubts about the
desirability of foreign investment have been voiced in China. Fixed
investment, the main driver of growth in China, has been increasing at a
rate that has aroused fears of overheating. Although FDI has never been
more than 15 per cent of total gross fixed capital formation in China, a
slowing of IFDI growth has been suggested as one of several levers to
restrain breakneck investment growth. Also, several Chinese companies
have now developed to the stage where they have an interest in curbing
competition from foreign affiliates in their sectors. At the same time,
concerns have arisen that the high proportion of output from IFDI might
lead to foreign monopoly power in some strategically important sectors,
threatening national security. Finally, there have also been some
worries that over-dependence on IFDI for economic growth might lead to
problems similar to those experienced by Latin America in the 1990s.

As a result, China’s government, while rejecting calls to
raise barriers against foreign investment, appears to be taking a more
selective stance, inviting FDI to plug gaps in the Chinese economy such
as high-tech and environmental industries. To satisfy calls from
increasingly strong domestic enterprises, the government abolished the
fiscal incentives for foreign investment as of 2008, with grandfathering
and phasing clauses to ensure existing foreign investments are not
disrupted.

CONCLUSIONS

China’s IFDI flows are likely to continue to rise, but less
rapidly than the rest of the economy. Government policy, while remaining
open to FDI, can afford to become more selective because there is no
longer a nationwide absence of financial institutions, basic
infrastructure, consumer goods industries and essential services. While
cross-border M&As have been welcomed in the recent past to rescue
ailing rustbelt industries, more successful companies may not be so
readily available for foreign acquisition. Private companies appear to
prefer share issues, namely initial public offerings, to selling out to
a foreign investor. Similarly, the government’s support for large
state-owned enterprises encourages such enterprises to be acquirers,
both at home and abroad, rather than targets for inbound M&As.

The Chinese market is expanding rapidly because of the high rate of
GDP growth and efforts to rebalance the economy towards private
consumption. In the latest UNCTAD survey, market size and market growth
are found to be the major factors in China’s position as the most
favoured location for IFDI in 2009-2011. (17) But there are now more and
more large Chinese enterprises capable of manufacturing competitive
products at prices that foreign investors may find difficult to match as
fiscal incentives are phased out. Lower production factor costs in
Vietnam, Bangladesh and other developing countries in the region will
prompt investors to consider expanding their manufacturing operations in
those countries.

ACKNOWLEDGEMENTS

I wish to thank Edward Turner, Guoming Xian and Benny Yan for their
helpful comments.

(1) China Ministry of Commerce (MOFCOM) Statistics at
<www.fdi.gov.cn> [Oct. 2011]; UNCTAD, FDI/TNC database at
<http://stats.unctad.org/fdi/> [Oct. 2011].

(2) Ibid., also see Karl Sauvant and Ken Davies, “What Will an
Appreciation of China’s Currency Do to Inward and Outward
FDI?”, Transnational Corporations Review 2, no. 4 (Dec. 2010) at
<http://tnc-online. net/journal/html/?157.html> [Oct. 2011].

(3) China recalculated its FDI stock figures in 2005, which had
hitherto been simple additions of annual flows, to bring them more in
line with internationally-recognised standards such as the OECD
Benchmark Definition of FDI. The result was an approximate halving of
the original estimate. Current figures are therefore understood to take
account of disinvestments. An explanation of the divergence of Chinese
FDI statistics from internationally standard practices is in OECD,
Investment Policy Review of China: Progress and Reform Challenges
(Paris: OECD, 2003).

(4) For example, in 2007, 2008 and 2009, Hong Kong’s FDI
inflows were USD54.3 billion, USD59.6 billion and USD48.4 billion,
respectively, while simultaneous outflows from Hong Kong were USD61.1
billion, USD50.6 billion and USD52.3 billion. See UNCTAD, World
Investment Report 2010: Investing in a Low-Carbon Economy (New York and
Geneva: United Nations, 2010).

(5) “Round-tripping” refers to the practice of setting up
special purpose entities in territories outside China, including Hong
Kong, which is treated as a source of foreign investment by the Chinese
authorities to invest in China and so benefit from fiscal incentives
offered to foreign investors. Since it is often intended to deceive the
authorities, round-tripping is impossible to estimate. The practice may
be in decline as a result of the abolition of foreign investment
incentives from 2008 and tighter reporting standards for special purpose
entities established abroad by Chinese companies since 2006.

(6) Over 80 per cent has gone to the eastern region. See OECD,
2003, op. cit.

(7) Details of these regulatory changes are in OECD, Investment
Policy Review of China: Open Policies towards Mergers and Acquisitions
(Paris: OECD, 2006), updated in OECD, Investment Policy Review of China:
Encouraging Responsible Business Conduct (Paris: OECD, 2008).

(8) Statement by Assistant Governor, Yi Gang, of the People’s
Bank of China, Reuters, 28 Aug. 2007.

(9) Deutsche Bank Global Markets Research, “Surviving Export
Slowdown”, Asia China Macro Strategy Series, 1 Apr. 2008.

(10) Economist Intelligence Unit (EIU) special report,
“China’s Stimulus Package: A Six-Month Report Card”,
London, EIU, 5 Aug. 2009.

(11) On 25 December 2009, the National Bureau of Statistics
announced an upward revision from 9 per cent to 9.6 per cent for the
2008 GDP growth figure at <www.china.org.cn> [Oct. 2011].

(12) The National Bureau of Statistics announced an upward revision
from 8.7 per cent to 9.1 per cent for the 2009 GDP growth figure on 7
July 2010. See Xinhua News Agency at <http://www.chinaview.cn>
[Oct. 2011].

(13) Details of fiscal incentives offered before 2008 are in the
tax chapter of OECD, 2003, op. cit.

(14) Ibid.

(15) For details of changes in the catalogues see: OECD, 2003, op.
cit.; OECD, 2006, op. cit.; OECD, 2008, op. cit.

(16) UNCTAD, FDI/TNC at <http://stats.unctad.org> [Oct.
2011].

(17) UNCTAD, World Investment Prospects Survey 2009-2011 (New York
and Geneva: United Nations, 2009).

Ken Davies (kendavies@yahoo.com) is an independent consultant
specialising in the analysis of Asian economies and policies to promote
investment for development. He is also a Visiting Professor at Durham
Business School at the University of Durham. He is currently conducting
research on the policies of China’s regional governments towards
encouraging outward direct investment.

TABLE 1
CHINA'S INWARD FDI STOCK COMPARED, 2000 AND 2009 (USD BILLION)

Economy                            2000   2009

China                               193    473
Memorandum: comparator economies
Brazil                              122    401
India                                18    164
Russia                               32    253
Singapore                           111    344

Source: UNCTAD's FDI/TNC database, available at
<http://stats.unctad.org/fdi/> [Oct. 2011].

TABLE 2
CHINA'S INWARD FDI FLOWS COMPARED, 2000-2009 (USD BILLION)

Economy          2000   2001   2002   2003   2004   2005

China              41     47     53     54     61     72
Compared with:
Brazil             33     23     17     10     18     15
India               4      6      6      4      6      8
Russia              3      3      4      8     15     13
Singapore          17     15      6     12     20     14

Economy          2006   2007   2008   2009   2010 (a)

China              69     84    108     90     66
Compared with:
Brazil             19     35     45     26     17
India              20     25     42     35     13 (b)
Russia             30     55     70     39     17
Singapore          28     32     23     17     14 (c)

Source: UNCTAD's FDI/TNC database at <http://stats.unctad.org/fdi/>
[Oct. 2011]; MOFCOM press releases at <http://www.fdi. gov.cn>
[Oct. 2011]; Banco Central do Brasil Statistics at
<http://www.bcb.gov.br/> [Oct. 2011]; Department of Industrial
Policy and Promotion, Ministry of Commerce and Industry, Government
of India FDI statistics at <http://dipp.nic.in/> [Oct. 2011]; Bank
of Russia at <http://www.cbr.ru/> [Oct. 2011]; Monetary Authority
of Singapore at <http://www.mas.gov.sg/> [Oct. 2011].

(a) For the first eight months only.

(b) For the first seven months only.

(c) For the first six months only.

TABLE 3

CHINA'S DISTRIBUTION OF INWARD FDI FLOWS, BY ECONOMIC SECTOR AND
INDUSTRY IN 2000 AND 2008 (USD BILLION AND PER CENT OF TOTAL INFLOWS)

Sector/industry     2001      2008

Primary              1.7       1.8
                    (3.6)     (1.7)
  Agriculture        0.9       1.2
                    (1.9)     (1.1)
  Mining             0.8       0.6
                    (1.7)     (0.6)
Secondary           30.9      49.9
                   (65.9)    (46.1)
  Manufacturing     30.9      49.9
                   (65.9)    (46.1)
Tertiary            14.3      56.6
                   (30.5)    (52.3)
  Utilities          2.3       1.7
                    (4.9)     (1.6)
  Construction       0.8       1.1
                    (1.7)     (1.0)
  Real estate        5.1      18.6
                   (10.9)    (17.2)
Total               46.9     108.3
                  (100.0)   (100.0)

Source: MOFCOM, available at <www.fdi.gov.cn> [Oct. 2011].

Note: The Chinese authorities include "utilities" and
"construction" in the secondary sector and the MOFCOM figures do
not include all activities; so it is not possible to disaggregate
and reconstruct the sectoral statistics entirely from their
published tables. See the official definition of sectors from the
annual statistical yearbook published by the National Bureau of
Statistics. In China, economic activities are categorised into the
following three strata of industry: (1) "Primary industry" refers
to agriculture, forestry, animal husbandry and fishery and services
in support of these industries; (2) "Secondary industry" refers to
mining and quarrying, manufacturing, production and supply of
electricity, water and gas, and construction; (3) "Tertiary
industry" refers to all other economic activities not included in
the primary or secondary industries.

TABLE 4
CHINA'S GEOGRAPHICAL DISTRIBUTION OF INWARD OF FDI STOCK
(A) IN 2002 AND 2008 (USD billion)

Region/economy                 2002     2008

World                          448.0    899.1
Developed Economies              n.a      n.a
  Europe                         n.a      n.a
    European union              33.9     61.6
      Belgium                    0.6      1.0
      Denmark                    0.5      1.3
      France                     5.5      8.9
      Germany                    8.0     15.1
      Italy                      2.2      4.3
      Netherlands                4.3      9.3
      Spain                      0.4      1.5
      Sweden                     0.8      1.6
      United Kingdom            10.7     15.7
North America                   43.2     66
  Canada                         3.4      6.4
  United States                 39.9     59.7
Other Developed Economies        n.a      n.a
  Australia
  Japan                         36.3     65.4
Developing economies             n.a      n.a
  Africa                         n.a      n.a
    Mauritius                    n.a      7.4
  Asia
    Hong Kong                  204.9    349.6
    Macau                        4.8      1.8
    Indonesia                    1.1      1.9
    Korea, Republic of          15.2     41.9
    Malaysia                     2.8      4.9
    Philippines                  1.4      2.5
    Singapore                   21.5     37.8
    Taiwan                      33.1     47.7
    Thailand                     2.4      3.2
    Western Samoa                2.3     12.3
Latin America and Caribbean      n.a      n.a
  Barbados                       n.a      2.7
  British Virgin Islands        24.4     90.1
  Cayman Islands                 3.8     16.5
unidentified others              n.a     79

Source: MOFCOM at <www.fdi.gov.cn> [Oct. 2011].

(a) This statistic released by MOFCOM for purposes of geographical
breakdown is cumulated FDI. As it does not include divestments, it
is much larger than the IFDI stock total in Table 1, which comes
closer to internationally-recognised standards of DI measurement.

Table 5
CHINA'S PRINCIPAL FOREIGN AFFILIATES IN CHINA, RANKED BY SALES
VALUE, 2008 (USD MILLION)

Rank   Name of Affiliate                   Industry      Sales

1      Hongfujin Precision Industry        Computer      26,974
       (Shenzhen) Co. Ltd.                 peripherals
2      Nokia Telecommunication Co. Ltd.    Cell phones   13,767
3      China Offshore Petroleum (China)    Oil and gas   11,354
         Limited
4      Dagong (Shanghai) Computer          Computers     10,535
         Co. Ltd.
5      Fay-Volkswagen Sales Co. Ltd.       Automobiles   10,412
6      Daofeng (Shanghai) Computer         Computers      9,471
         Co. Ltd.
7      Angang Steel Ltd.                   Steel          9,424
8      Shanghai GM Automobile Co. Ltd.     Automobiles    9,366
9      Fay-Volkswagen Co. Ltd.             Automobiles    9,217
10     Motorola (China) Electronic Ltd.    Telecom        8,099
                                           equipment
11     Maanshan Steel Co. Ltd.             Steel          7,287
12     Huaneng International Power         Electricity    7,257
         Co. Ltd.                          generation
13     Shanghai Volkswagen Automotive      Automobiles    7,233
         Sale Ltd.
14     Dongfeng Toyota Auto Sale Co.       Automobiles    7,145
         Ltd.
15     Dongfeng Auto Company               Automobiles    7,057
16     Air China Co. Ltd.                  Airline        6,767
17     Shanghai Volkswagen                 Automobiles    6,734
         Automotive Ltd.
18     Yingshunda Science & Technology     Consumer       6,430
         Co. Ltd.                          electronics
19     Nokia (China) Investment            Cell phones    6,393
         Co. Ltd.
20     China Southern Airlines             Airline        6,350
         Co. Ltd.

TABLE 6
CHINA'S MAIN INWARD M&A DEALS BY INWARD INVESTING FIRM, 2007-2009

Year   Acquiring Company              Home Economy

2009   Function Well Ltd.             Taiwan
2009   MAN Finance & Holding Sarl     Luxembourg
2009   GCL-Poly Energy Holdings Ltd   Hong Kong
2009   GCL-Poly Energy Holdings Ltd   Hong Kong
2009   TM Entertainment & Media Inc   United States
2009   HongKong Electric (Holdings)   Hong Kong
         Ltd.
2009   Asahi Breweries Ltd            Japan
2009   GIC Real Estate Pte Ltd        Singapore
2009   ADF Phoenix IV Ltd             Singapore
2009   Hana Bank                      Korea, Republic of
2009   Franshion Ppty (China) Ltd     Hong Kong
2009   BBVA                           Spain
2009   CRH PLC                        Ireland
2009   Investor Group                 Hong Kong
2009   Middle Kingdom Alliance Corp   United States
2008   BP Overseas Development Co     Thailand
         Ltd
2008   Jade Green Investments Ltd     Hong Kong
2008   Johnson & Johnson              United States
2008   Deutsche Bank AG               Germany
2008   Holcim Ltd                     Switzerland
2008   Monster Worldwide Inc          United States
2008   Songzai Intl Holding Group     United States
         Inc
2008   Hong Leong Bank Bhd            Malaysia
2008   CapitaRetail China Trust       Singapore
2008   Blackstone Group LP            United States
2008   Shui On Investment Co Ltd      Hong Kong
2008   Beiersdorf AG                  Germany
2008   Bank of America Corp           United States
2008   Bank of America Corp           United States
2008   CITIC Pacific Ltd              Hong Kong
2007   China Merchants Intl           Hong Kong
         Terminals
2007   China Real Estate Opp          Luxembourg
2007   Asia Bottles (HK) Co Ltd       Hong Kong
2007   China Mining Resources Grp     Hong Kong
         Ltd
2007   GuocoLand (China) Ltd          Hong Kong
2007   Investor Group                 United States
2007   Panva Gas Holdings Ltd         Hong Kong
2007   BBVA                           Spain
2007   3Com Corp                      United States
2007   Haier Electronics Group Co     Hong Kong
         Ltd
2007   SEB Internationale SAS         France
2007   ANZ Banking Group Ltd          Australia
2007   Investor Group                 United States
2007   FedEx Express Corp             United States
2007   UBS AG                         Switzerland

Year   Acquiring Company              Target Company

2009   Function Well Ltd.             Champ Tech Optical Foshan Corp
2009   MAN Finance & Holding Sarl     Sinotruk (Hong Kong) Ltd
2009   GCL-Poly Energy Holdings Ltd   Greatest Joy International Ltd
2009   GCL-Poly Energy Holdings Ltd   GCL Solar Energy Tech Hldg Inc
2009   TM Entertainment & Media Inc   Hong Kong Mandefu Holdings Ltd
2009   HongKong Electric (Holdings)   Outram Ltd
         Ltd.
2009   Asahi Breweries Ltd            Tsingtao Brewery Co. Ltd.
2009   GIC Real Estate Pte Ltd        ProLogis-China Operations
2009   ADF Phoenix IV Ltd             Nanjing International Finance
2009   Hana Bank                      Bank of Jilin Co Ltd
2009   Franshion Ppty (China) Ltd     China Jin Mao (Group) Co Ltd
2009   BBVA                           China Citic Bank
2009   CRH PLC                        Jilin Yatai Grp Cement Invest
2009   Investor Group                 Shanghai Shimao Co Ltd
2009   Middle Kingdom Alliance Corp   Pypo Digital Co Ltd
2008   BP Overseas Development Co     Asian American Coal Inc
         Ltd
2008   Jade Green Investments Ltd     Fortune Dragon Coking Coal
2008   Johnson & Johnson              Beijing Dabao Cosmetics Co Ltd
2008   Deutsche Bank AG               Huaxia Bank Co Ltd
2008   Holcim Ltd                     Huaxin Cement Co Ltd
2008   Monster Worldwide Inc          ChinaHR.com Holdings Ltd
2008   Songzai Intl Holding Group     Heilongjiang Xing An Grp Hong,
         Inc                          Yuan Coal Mining Co. Ltd
2008   Hong Leong Bank Bhd            Chengdu City Commercial Bank
2008   CapitaRetail China Trust       Xizhimen Mall
2008   Blackstone Group LP            China National Chemical Corp
2008   Shui On Investment Co Ltd      Shui On Land Ltd
2008   Beiersdorf AG                  C-BONS Hair Care
2008   Bank of America Corp           China Construction Bank Corp
2008   Bank of America Corp           China Construction Bank Corp
2008   CITIC Pacific Ltd              CSSC Complex Property Co Ltd
2007   China Merchants Intl           Zhanjiang Port (Group) Co Ltd
         Terminals
2007   China Real Estate Opp          City Centre Development Phases
2007   Asia Bottles (HK) Co Ltd       Zhuhai Zhongfu Entrp Co Ltd
2007   China Mining Resources Grp     Harbin Songjiang Copper (Grp)
         Ltd                            Ltd
2007   GuocoLand (China) Ltd          Beijing Chengjian Donghua RE
2007   Investor Group                 Guangzhou Hengda Indl Grp Co
2007   Panva Gas Holdings Ltd         Hong Kong & China Gas (Qingdao)
2007   BBVA                           China Citic Bank
2007   3Com Corp                      Huawei-3com Co Ltd
2007   Haier Electronics Group Co     Haier Indesit (Qingdao) Washing
         Ltd
2007   SEB Internationale SAS         Zhejiang Supor Cookware Co Ltd
2007   ANZ Banking Group Ltd          Shanghai Country Commercial Bank
2007   Investor Group                 Henan Luohe Shuanghui Industry
2007   FedEx Express Corp             Federal Express-DTW Co Ltd
2007   UBS AG                         Beijing Securities Co Ltd

Year   Acquiring Company              Target Industry

2009   Function Well Ltd.             Optical instruments
2009   MAN Finance & Holding Sarl     Industrial vehicles
                                        manufacturing
2009   GCL-Poly Energy Holdings Ltd   Semiconductors
2009   GCL-Poly Energy Holdings Ltd   Semiconductors
2009   TM Entertainment & Media Inc   Advertising agencies
2009   HongKong Electric (Holdings)   Electric services
         Ltd.
2009   Asahi Breweries Ltd            Beverages
2009   GIC Real Estate Pte Ltd        Land developers
2009   ADF Phoenix IV Ltd             Building operator
2009   Hana Bank                      Financial services
2009   Franshion Ppty (China) Ltd     Building operator
2009   BBVA                           Banking
2009   CRH PLC                        Investors
2009   Investor Group                 Land developers
2009   Middle Kingdom Alliance Corp   Electronic equipment
2008   BP Overseas Development Co     Mining
         Ltd
2008   Jade Green Investments Ltd     Mining
2008   Johnson & Johnson              Cosmetics
2008   Deutsche Bank AG               Banking
2008   Holcim Ltd                     Cement
2008   Monster Worldwide Inc          Employment agencies
2008   Songzai Intl Holding Group     Mining
         Inc
2008   Hong Leong Bank Bhd            Banking
2008   CapitaRetail China Trust       Building operator
2008   Blackstone Group LP            Chemicals
2008   Shui On Investment Co Ltd      Land developers
2008   Beiersdorf AG                  Cosmetics
2008   Bank of America Corp           Banking
2008   Bank of America Corp           Banking
2008   CITIC Pacific Ltd              Real estate
2007   China Merchants Intl           Transportation
         Terminals
2007   China Real Estate Opp          Real estate
2007   Asia Bottles (HK) Co Ltd       Manufacturing
2007   China Mining Resources Grp     Mining
         Ltd
2007   GuocoLand (China) Ltd          Real estate
2007   Investor Group                 Conglomerate
2007   Panva Gas Holdings Ltd         Oil and gas
2007   BBVA                           Banking
2007   3Com Corp                      Telecommunications
2007   Haier Electronics Group Co     Electrical goods
         Ltd
2007   SEB Internationale SAS         Electrical goods
2007   ANZ Banking Group Ltd          Banking
2007   Investor Group                 Food
2007   FedEx Express Corp             Transportation
2007   UBS AG                         Financial services

Year   Acquiring Company                Shares     Transaction
                                       Acquired    Value (USD
                                      (per cent)    million)

2009   Function Well Ltd.                100           230.6
2009   MAN Finance & Holding Sarl         25           782.2
2009   GCL-Poly Energy Holdings Ltd      100           911.6
2009   GCL-Poly Energy Holdings Ltd      100         3,787.50
2009   TM Entertainment & Media Inc      100           263.6
2009   HongKong Electric (Holdings)      100           732.6
         Ltd.
2009   Asahi Breweries Ltd                20           667
2009   GIC Real Estate Pte Ltd           100         1,300.00
2009   ADF Phoenix IV Ltd                100           232.8
2009   Hana Bank                          19.7         327.4
2009   Franshion Ppty (China) Ltd         45.1         737.5
2009   BBVA                                4.9       1,601.60
2009   CRH PLC                            26           296.7
2009   Investor Group                     56.8       1,012.10
2009   Middle Kingdom Alliance Corp      100           378
2008   BP Overseas Development Co         78.4         432.8
         Ltd
2008   Jade Green Investments Ltd        100         1,350.80
2008   Johnson & Johnson                 100           327.8
2008   Deutsche Bank AG                    5.3         552.9
2008   Holcim Ltd                         18.6         282.7
2008   Monster Worldwide Inc              55           225
2008   Songzai Intl Holding Group         90           550
         Inc
2008   Hong Leong Bank Bhd                20           261
2008   CapitaRetail China Trust          100           229.3
2008   Blackstone Group LP                20           600
2008   Shui On Investment Co Ltd           5.1         230.2
2008   Beiersdorf AG                      85           381.4
2008   Bank of America Corp                8.4       7,067.40
2008   Bank of America Corp                2.6       1,860.50
2008   CITIC Pacific Ltd                  49           213.3
2007   China Merchants Intl               45           215.8
         Terminals
2007   China Real Estate Opp             100           548.1
2007   Asia Bottles (HK) Co Ltd           29           225
2007   China Mining Resources Grp         75.1         233.8
         Ltd
2007   GuocoLand (China) Ltd              90           751.7
2007   Investor Group                      8           400
2007   Panva Gas Holdings Ltd            100           393.5
2007   BBVA                                5           648.5
2007   3Com Corp                          49           882
2007   Haier Electronics Group Co         70           385.4
         Ltd
2007   SEB Internationale SAS             22.7         311.4
2007   ANZ Banking Group Ltd              19.9         263
2007   Investor Group                    100           251.5
2007   FedEx Express Corp                100           400
2007   UBS AG                             20           210.5

Source: Thomson ONE Banker. Thomson Reuters.

TABLE 7
CHINA'S MAIN 20 GREENFIELD PROJECTS, JUNE 2006-SEPTEMBER 2009

Year   Company Name                 Home Economy

2009   Royal Dutch Shell            Netherlands
2009   Cheng Shin Rubber            Taiwan
         Industry
2009   Michelin                     France
2009   Chevron Corporation          United States
2009   Chevron Corporation          United States
2009   Novartis                     Switzerland
2009   Hon Hai Precision            Taiwan
         Industry
2009   Charoen Pokphand Group       Thailand
2009   Hon Hai Precision            Taiwan
         Industry
2009   Samsung                      Republic of Korea
2009   Shimao Property Holdings     Hong Kong
         Ltd.
2009   LG                           Republic of Korea
2009   China Merchants Holdings     Hong Kong
         (International)
2009   Daiwa House Industry         Japan
2009   Jumbo Lane Investments       United Kingdom
2008   Daimler AG                   Germany
2008   ROSM                         France
2008   Royal Vopak                  Netherlands
2008   Howard Group Development     Hong Kong
2008   Walt Disney                  United States
2008   SK Energy                    Republic of Korea
2008   Henderson                    Hong Kong
2008   Lotte Group                  Republic of Korea
2008   Volkswagen                   Germany
2008   Electric Power               Japan
         Development (J-Power)
2008   Yulon Motor                  Taiwan
2008   Hyundai Motor                Republic of Korea
2008   Compal Electronics           Taiwan
2008   Saudi Basic Industries       Saudi Arabia
         (SABIC)
2008   Israel Corp (IC)             Israel
2007   China Resources Power        Hong Kong
         Holdings (CRP)
2007   Mori Building                Japan
2007   Formosa Plastics Group       Taiwan
         (FPG)
2007   Ben Rautin                   Malaysia
2007   Hon Hai Precision Industry   Taiwan
2007   IBM                          United States
2007   Gulf Finance House           Bahrain
2007   Kingdom Hotel Investments    UAE
         (KHI)
2007   Hynix Semiconductor          Republic of Korea
2007   Sinar Mas Group              Indonesia
2007   Villar Mir Group             Spain
2007   DBS Group Holdings           Singapore
2007   STX Corporation              Republic of Korea
2007   Bayerische Motoren Werke     Germany
         (BMW)
2007   Intel                        United States

Year   Company Name                 Industry             Estimated/
                                                         Announced
                                                         Investment
                                                         Value (USD
                                                          billion)

2009   Royal Dutch Shell            Coal, oil and           0.8
                                      natural gas
2009   Cheng Shin Rubber            Rubber                  1.0
         Industry
2009   Michelin                     Rubber                  1.0
2009   Chevron Corporation          Coal, oil and           4.7
                                      natural gas
2009   Chevron Corporation          Coal, oil and           0.8
                                      natural gas
2009   Novartis                     Biotechnology           1.0
2009   Hon Hai Precision            Electronic              1.0
         Industry                     components
2009   Charoen Pokphand Group       Food & tobacco          1.2
2009   Hon Hai Precision            Electronic              1.0
         Industry                     components
2009   Samsung                      Electronic              2.2
                                      components
2009   Shimao Property Holdings     Real estate             1.2
         Ltd.
2009   LG                           Electronic              4.0
                                      components
2009   China Merchants Holdings     Warehousing &           1.2
         (International)              storage
2009   Daiwa House Industry         Real estate             0.8
2009   Jumbo Lane Investments       Coal, oil and           0.8
                                      natural gas
2008   Daimler AG                   Automotive OEM          0.9
2008   ROSM                         Consumer products       2.0
2008   Royal Vopak                  Warehousing &           1.0
                                      storage
2008   Howard Group Development     Transportation          1.5
2008   Walt Disney                  Leisure &               3.6
                                      entertainment
2008   SK Energy                    Chemicals               2.0
2008   Henderson                    Real estate             1.4
2008   Lotte Group                  Real estate             1.0

2008   Volkswagen                   Automotive OEM          0.9
2008   Electric Power               Coal, oil and           0.7
         Development (J-Power)        natural gas
2008   Yulon Motor                  Automotive OEM          0.7
2008   Hyundai Motor                Automotive OEM          0.8
2008   Compal Electronics           Business machines       0.7
                                      & equipment
2008   Saudi Basic Industries       Chemicals               1.7
         (SABIC)
2008   Israel Corp (IC)             Automotive OEM          0.8
2007   China Resources Power        Metals                  2.8
         Holdings (CRP)
2007   Mori Building                Real estate             1.0
2007   Formosa Plastics Group       Metals                  0.9
         (FPG)
2007   Ben Rautin                   Transportation          3.0
2007   Hon Hai Precision Industry   Electronic              1.0
                                      components
2007   IBM                          Semiconductors          1.8
2007   Gulf Finance House           Real estate             5.0
2007   Kingdom Hotel Investments    Hotels & tourism        0.9
         (KHI)
2007   Hynix Semiconductor          Semiconductors          1.5
2007   Sinar Mas Group              Paper, printing &       1.0
                                      packaging
2007   Villar Mir Group             Metals                  1.4
2007   DBS Group Holdings           Financial services      2.8
2007   STX Corporation              Non-automotive          1.0
                                      transport OEM
2007   Bayerische Motoren Werke     Automotive OEM          0.8
         (BMW)
2007   Intel                        Semiconductors          2.5

Source: FDI Intelligence, a service from the Financial Times Ltd.