Foreign investors provide a critical imprimatur of approval when they invest their money in China. Here is what the picture looks like over the past few decades.
This graph shows the magnitude of foreign capital investment in China expressed as a percentage of China GDP.
In 1992, the leader of China, Deng Xiaoping, personally undertook what came to be known as the “Southern Tour” wherein he visited Shenzhen and other special economic zones touting accelerated economic reforms, an orientation toward market-driven policies, and formally opening China to foreign investment.
This was the first time the Chinese Premier made such public annoucements, so the world took it as a very encouraging sign and opened their pocketbooks.
The result was that a $4.4B foreign capital inflow in 1991 grew to more than $27B in 1993. This was the high water mark for foreign investment.
It was also at this time that China began to work in earnest to become admitted to the World Trade Organization. China entered the WTO in 2001. They had been working on admission to the WTO for more than 15 years.
[The WTO is the successor to GATT — the General Agreement on Tariffs and Trade. A chap tried to baloneyize me and tell me they were two different organizations, but they are not. Trust me. You know who you are, Ace.]
If you look at the chart — remember it is foreign capital as a percentage of Chinese GDP — it shows that foreign investment is waning. Chinese GDP is going up, so the declining percentage is even more compelling.
I don’t think anybody is paying attention to these bits of data.
Fine, dear reader.
In evaluating WTF is going on in China — I think they are in big economic trouble — know that the whole rest of the world has turned off the tap on foreign investment in China which means the Chinese hold on manufacturing is slipping as it requires massive foreign investment to build factories.
These capital flows will become negative as more countries repatriate their manufacturing and friend shore others.
But, hey, what the Hell do I know anyway? I’m just a Big Red Car. Be well. Perform a small kindness today.
