China would be ‘mistaken’ to undervalue foreign investment, says business researcher

It would be a mistake for the Chinese leadership under Xi Jinping to overlook the true value of foreign investment for China, according to a researcher who said the impact of foreign investment on the Chinese economy is greater than headline numbers suggest.

The message comes as Chinese authorities, after more than three decades of rapid economic development, are getting increasingly hostile to foreign investors, leading many overseas brands to scale down their China operations or pull out of the nation completely. Marks & Spencer, the British high street store, is closing all its China stores and Panasonic has ended all of its television manufacturing in China.

In his latest book, Developing China: The Remarkable Impact of Foreign Direct Investment, Michael Enright, a business professor at the University of Hong Kong and director of a consulting firm bearing his name, said foreign-funded companies contributed to a third of China’s gross domestic output from 2009 to 2013.

While actual FDI inflow now accounts for just a tiny portion of China’s total investment, foreign investors also bring in technology and ideas that are “critical” to China’s development, Enright wrote in the book.

“The question mark on China’s front is whether Chinese leaders will have an agenda to support the local economy but not close off China to international companies,” Enright said in an interview in Hong Kong.