Foreign investors learn that playing with zeros can be for naught

Strange that the mainland casts an extraordinary spell over otherwise hard-nosed bankers and foreign investors, many of whom seem to have few qualms about throwing caution to the winds when investing in or lending to mainland companies.

One example of a rose-tinted view of the mainland is collapsed Guangdong International Trust and Investment Corp, whose lack of transparency and accountability failed to deter bankers from lending to the group.

Hardly a week passes without a foreign dignitary gushing over the size and importance of the mainland economy. Predictions that the mainland will soon be the world's biggest market for this or that product are made with such frequency that many investors and bankers soon become believers.

Little wonder that for four years, the mainland was the biggest recipient of foreign direct investment in the developing world. At last count, US$250 billion has poured into about 145,000 ventures.

The mainland is no doubt a big player in commodities such as copper, rice, steel and wheat. But it is not in many other fields, especially the industrial sector.

So, why the irrational exuberance? This has much to do with its 1,200,000,000 population. The number of zeros has bewitched companies into believing the country is a goldmine waiting to be tapped. Perhaps it has also to do with its impressive growth story.

According to the World Bank, the mainland economy grew more than four-fold in the past 15 years and real gross domestic product per capita rose by a spectacular 8 per cent a year between 1978 and 1995, lifting 200 million people out of poverty.