Let in more foreign money: researcher

PUBLISHED : Thursday, 10 August, 2006, 12:00am
UPDATED : Thursday, 10 August, 2006, 12:00am

Capital injections 'will do economy more good than harm'

A leading researcher at the Ministry of Commerce has argued against restricting foreign investment on the mainland, saying such capital injections will spur reform in state-owned enterprises and make them more competitive.

Wang Zhile, director of the ministry's Research Centre for Transnational Corporations, joined the heated debate on whether to restrict foreign investment, listing six reasons to support his argument and offering reassurance that foreign investment would not harm the mainland's economy.

Those for and against restrictions on foreign investment have been voicing their opinions since the government's recent decision to limit foreign investment in the property sector after concerns that overseas 'hot money' had fuelled market speculation.

'Recently, people have voiced their concerns on whether foreign investment would affect economic security. Some people request that such investment be restricted,' China News Service quoted Professor Wang as saying.

To judge whether the economy was sound should be based on its competitiveness, Professor Wang said. China was in a good position with 19 state-owned enterprises making it into the Fortune 500 last year, he added.

Another concern with foreign investment was that a particular company would monopolise an industry. But Professor Wang said not one mainland industry was being monopolised by a foreign firm.

Professor Wang's report said the benefits of foreign investment included cash injections, encouraging reform and restructuring in state-owned enterprises and making them more competitive.

'Our research found that many state-owned enterprises that have just been approved to partner with a transnational firm have improved their competitiveness,' the report said.

'When partnering with transnational companies, state-owned enterprises often encounter problems because they have not reformed their management structure. These enterprises lack the drive to self-develop. They lack the urge to bring in new technology and innovation.'

Professor Wang's report comes at a time when US venture capital company Carlyle Group is still waiting for official approval of its planned acquisition of state-owned Xugong Construction Machinery. The plan was first announced in October.

There have also been reports that Beijing is considering setting up an interagency committee to vet foreign acquisitions in certain strategic industries.

Xinhua reported earlier that the central government was considering a law to allow share-swapping between foreign and mainland companies undertaking mergers and acquisitions. The draft regulation was the government's attempt to strengthen supervision of mergers and acquisitions, according to China Securities Journal.