China Trade 101: Foreign Direct Investment
Filed in archive Private Equity on January 22, 2008
I've seen it discussed in a number of places recently. There are some basic truths about Foreign direct investment that seem to get covered up, misinterpreted, distorted - pick your adjective...
When we talk about American investment in China, many Americans spit and cuss and start saying things that sound like the come from the script of Mel Gibson's movie, Conspiracy Theory. They seem to think that greedy American companies have moved American jobs to China. But the truth is that the vast majority of American companies operating in China are there because they want to sell something to the Chinese consumer. Like, say, a Buick. The American companies are really very involved in producing thing in China that can be exported to America.
"Hasn't China become the world's factory?" you ask. Sure it has. But it's our friends in countries like Japan and Korea who are financing that. The Japanese stock market trembles so much at the thought of a US recession partly because it's a double whammy for them. If we stop buying Japanese products it hurts Japan, and if we stop buying Chinese made goods it hurts Japan.

But don't U.S. firms have huge sums of money tied up in China that could have been used someplace else? The short answer to that question is, well, no. If you want a point of comparison so that you can see just how much money we have tied up in China, here's a tidbit from the U.S. State Department's page of Background Note on Ireland...As of year-end 2006, the stock of U.S. foreign direct investment in Ireland stood at $84 billion, more than double the U.S. total for China and India combined ($31.2 billion). Currently, there are approximately 620 U.S. subsidiaries in Ireland, employing roughly 100,000 people and spanning activities from manufacturing of high-tech electronics, computer products, medical supplies, and pharmaceuticals to retailing, banking, finance, and other services. In more recent years, Ireland has also become an important research and development (R&D) center for U.S. firms in Europe.
In other words, American investment in China is between one-half and one-third as much as American investment in Ireland. But nobody seems to sit around and worry about home vulnerable we are because of all the capital we have tied up in Ireland, or about what the Irish are doing with all our money...
What about Chinese investment in America? Aren't the Chinese basically trying to buy our country? There's at least two ways to look at that. In terms of foreign direct investment by Chinese companies into the U.S. economy, Chinese investment in America has been relatively small compared to American investment in China. According to one source, total US investment in China at the end of 2006 was about $22 billion, while total Chinese investment in the US was only $600 million at that time. The shape of the US economy, particularly losses in the subprime mortgage fiasco, has has allowed China to catch up a little with deal like the recent $5 billion investment the Chinese made in Morgan Stanley. But America still has considerably more invested in China than China has invested in America.
The other perspective has less to do with tradition foreign investment in commercial enterprise. The Chinese are our second biggest market for US Treasury Bonds...
Lee Branstetter & Fritz Foley have a good analysis of the situation available online: Have MNCs hollowed out their domestic economies to China?
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Response from:
Trade investment
(10/30/08 5:02pm)
Response from:
Thomas Prato
(03/09/09 12:58pm)
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Robert Reel, CCIM
Thomas Prato
Tracy Winterfeld
TR Las Vegas Group
5300 W. Sahara Ave Suite 202
Las Vegas NV. 89146
702.478-7000 Office
702.478-7007 Fax
www.trlvgroup.com
56-73 acre, Las Vegas Gaming, Leisure, Hotel, Sports Dev. Site
We are requesting the opportunity to give a full presentation of our unique project site on the Las Vegas Strip next to the MGM/Dubai/Kerzner future hotel & casino and the Stratosphere Hotel & Casino recently acquired by Goldman Sachs! Project "Neon Lights" is one of the most unique real estate assemblages in history containing approximately 56 net acres in the heart of the City of Las Vegas and is being offered 50% below January 2007 appraised value. The site had achieved zoning for a mixed use development including gaming, retail, condo, hotels and a 22,000 seat events arena which has strong support to bring an NBA team along with benefiting form the explosive Las Vegas convention business. This property has +/-17 acres of City-owned streets and alleyways which previously had been approved for vacation and presented a +/-73 gross acre development site with a blended price of $8.3M per acre. Additionally, our site is located in a City redevelopment area and had obtained an approximate $600 Million Tax Increment Financing (TIF) package based on the tax revenue of the future development which was previously approved by the City. Furthermore, the development has potential for the City's assistance in securing bond financing for arena construction. Project "Neon Lights" may be acquired in its entirety or in portions with financing options available. We can also introduce potential joint venture opportunities for development or with major gaming firms who have expressed an interest to manage operations. You can visit www.trlvgroup.com for more details on this opportunity.
Please call at our US office 702.478.7000 or log on to www.trlvgroup.com if you are interested in more details on project "Neon Lights". This property was recently showcased at Cityscape USA Convention in New York's Javits Center. Additional arena highlights and visuals are attached..
Understanding your strong influence in the development field we felt that you may have, or know of someone who may have, access to funding a 2.6 Billion first phase, have a joint venture idea, envision a development project to fit on this site or to master plan and land bank for future resale. Please contact me to discuss and thank you for your time.
Robert Reel, CCIM
Thomas Prato
Tracy Winterfeld
TR Las Vegas Group
5300 W. Sahara Ave Suite 202
Las Vegas NV. 89146
702.478-7000 Office
702.478-7007 Fax
www.trlvgroup.com

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