Nuclear Philosophy
Greater efforts to promote world nuclear security cooperation highlight China's increasing sense of global responsibility
Current Issue
· Table of Contents
· Editor's Desk
· Previous Issues
· Subscribe to Mag
Subscribe Now >>
Weekly Watch
Expert's View
Market Watch
North American Report
Government Documents
Expat's Eye
Photo Gallery
Reader's Service
Learning with
'Beijing Review'
E-mail us
RSS Feeds
PDF Edition
Reader's Letters
Make Beijing Review your homepage
Hot Links

Market Avenue

Special> Boao Forum for Asia 2014> Archive
UPDATED: May 4, 2009
Destination China

STRONG CONFIDENCE: Edgar G. Hotard believes a fast economic recovery will polish China's appeal to foreign investment

China's foreign direct investment (FDI) inflows dropped by about 20 percent year on year in the first quarter, raising questions about the country's attractiveness to foreign investors. Edgar G. Hotard, Chairman of the Monitor Group (China), sat down with Beijing Review reporter Hu Yue on the sidelines of the Boao Forum for Asia on April 17-19, to discuss this issue. The Monitor Group is a global provider of strategy consulting services, headquartered in the United States and with offices in China.

Beijing Review: China's appeal for foreign investment seems to be fading as reflected in the declining FDI. Do you think the decline will continue in the long term?

Edgar G. Hotard: There has been some decline in FDI, but this is more a result of the macro issues deriving from the global downturn and not a reflection of the inherent attractiveness of China. Foreign companies may be holding off on investments until the country's capacity imbalances are properly addressed and there is clearer visibility on growth. Also, private equity investment has seen a decline but should rebound once the economy begins to improve and valuations can be matched with market opportunities and growth.

How are foreign companies revaluing the Chinese market during a downturn, and how are they rethinking their business strategies to match the realities?

Foreign companies are revising their strategies based on the realities of the marketplace and their strategic goals for their business in China. If their strategic objective was to tap into low-cost labor and export their branded goods back to the United States and Europe, they will have to revamp their strategy to address excess capacity in China as consumer demand in the West has declined precipitously.

Those companies that invested in China for growth in the domestic market also will require a strategy revamp as the economy here is continuing to grow at a faster pace than expected despite the global recession. Having achieved 6.1-percent GDP growth in the first quarter when exports plunged by a significant 25 percent means that domestic demand remains relatively strong and continues to grow. This is a positive sign that the Chinese economy might bottom out faster and lead the global recovery. As a result, foreign companies have to better understand the growing market segments and position themselves for future growth opportunities. Reviewing and updating their strategies to respond to the downturn and yet prepare for growth is what a lot of multinationals in China are doing today.

As competition heats up in China, foreign companies need to develop a set of strategic actions to implement. Cost management consistent with strategic direction and balancing the short-term focus on cash preservation with longer-term strategic action is important, and driving innovation into their organizations will be needed in order to create profitable growth.

What should China do to further improve its business environment for foreign investments?

First of all, China should continue to communicate and make its investment regulations understood since there have been some significant changes in terms of attracting foreign investment, including private equity and venture capital.

Second, China should push even harder on innovation, particularly in high technology and basic science development, which is a long-term benefit. Additionally, China can provide an indication of efforts the country is making and highlight successes. Innovation in companies is very important at this time as it is usually during economic downturns that innovation occurs in market leading companies in product development, services, business models and marketing approaches. The constant commitment to becoming a more innovative society and pursuing high technologies and other areas of innovation will definitely help the domestic economy recover.

Also, it is necessary to engage with the world and continue to be a responsible global citizen as China has become.

What do you think of the regulatory risks facing Chinese companies on their path of going global through mergers and acquisitions?

I think there is too much attention focused on that issue. There are some Chinese companies looking to buy foreign strategic assets or technologies that might have national security implications. But that is only a small part of the total cases. There are a lot of other successful acquisition cases in manufacturing and consumer services-related sectors that have no national security issues. Foreign regulators have a reason to be careful about national security issues, but they should not label every potential acquisition under that classification.

Top Story
-Dying With Dignity
-A New Dawn for NGOs
-Government Work Under Microscope
-Tigers and Flies
-A Conflict of ‘Interest’
Most Popular
About BEIJINGREVIEW | About beijingreview.com | Rss Feeds | Contact us | Advertising | Subscribe & Service | Make Beijing Review your homepage
Copyright Beijing Review All right reserved