Curbs on foreigners based on flawed analysis of cash inflows

Foreign direct investment on the mainland is expected to hit a record US$100 billion this year, defying concern that the environment for international investors is deteriorating.

SCMP, September 7

Let's put some things in perspective here. It is entirely possible that net direct investment inflows to China will reach US$100 billion this year. But this is no record. In 2007, the official figure was US$121 billion.

Note, however, that I speak here of net direct investment, not specifically foreign direct investment. I do not think it really possible to distinguish what is foreign and what is not in these capital flows. My guess is that most of them represent Chinese nationals or Hong Kong residents dressing themselves up to look international so they don't have to go to the back of the queue when they want to take their money out of yuan and into dollars again.

Somehow, in some way, there is something that does not quite ring true in the picture of foreigners, native-born Europeans and Americans let's say, falling over themselves to put dollars into railway infrastructure projects or high-rises in Chengdu and complaining that they cannot do it.

These kinds of foreigners are much more likely to want only investment in manufacturing plants for light industrial goods that they can sell in their home markets.