Chinese outward foreign direct investment reached record level of US$6.9 billion for the last year. It means overseas investments rose 26 percent from US$5,5 billion in 2004. Although it is quite fast pace Chinese investments slowed down sharply because they rose more than 93 percent in 2004. Moreover, my personal estimated was Chinese FDI could reach about US$10 billion the last year so I pretty much missed the real number. I see two important factors contributed to the slowdown.
First, Chinese FDI have been in absolute numbers very low last years, so they could keep quite good pace. And the year 2004 turned aside from the trend typical for previous years. The year 2004 was really extremely successful for Chinese outward FDI. So, the last year fell perfectly within the long-term trend. But it must not have been because there is the second, more important, reason why the invesment slowed down. Chinese outward FDI could have reached much higher level because there was one huge bid for overseas investment by a Chinese company. China's National Offshore Oil Corporation (CNOOC) was interested in obtaining American oil company, Unocal, for US$18.5 billion and although it was the top offer (the second was Chevron) CNOOC did not acquire the American firm. A similar case occurred in Canada less than a year earlier. China's MinMetals Coroporation showed an interest in Canada's largest mining company, Noranda. The cash bid reached US$5 billion. Although Noranda increased its market capitalization to defend against the bid, both of companies continued in a discussion about the possible deal. Both the Canadian case and the American one were finished by political interference. Canadian government introduced a bill that allows it to block any foreign takeover on national security grounds. In the USA the US House of Representatives voted in favor of a resolution stating that allowing CNOOC to buy Unocal would “threaten to impair the national security of the United States.” Moreover, the takeover was considered to be unfair because US$13 billion out of offer came directly from loans from Chinese government.
All reasons are totally foundationless and are interference with private property titles although the bids came from state-owned companies. How can be the assets of private company in the interest of national security? The reasoning indicates the government eventually takes all the private property as its own because government tells us it decides about what private property will be considered to be in the interest of national security or any other interest of government decision. It holds especially for raw materials. But the oil, zinc, copper or any other raw material deposits does not belong to US government but to private owners. Present circumstances under which US government does not directly own the assets but claims the right to decide about private property usage is much worse than direct ownership of assets by Chinese government. The reason hidden behind the afraid of national security is virtually the afraid of possible lost of the source of looting (= taxation). So, the power foolery (desire for political power), not the effort to protect people, decided about the failure of Chinese investment.
