Chinese envoy chides US, touts PRC's contributions
　

HARDLINE STANCE: Zhou Wenzhong repeated Chinese warnings against independence for Taiwan and lashed out at US lawmakers for mulling protectionist trade bills

AP, INDIANAPOLIS, INDIANA
Sunday, Feb 24, 2008, Page 1

The Chinese ambassador to the US chided Washington for its protectionist trade sentiment, while touting China's contributions throughout the world.

Speaking on Friday before about 200 people at a university in Indianapolis, Chinese Ambassador Zhou Wenzhong (周文重) reiterated his country's hardline stance on Taiwan, saying its independence was out of the question.

"The 1.3 billion people on the mainland and the 23 million people in Taiwan are of the same blood and share a common destiny," he said. "We are willing to make every effort with the utmost sincerity to achieve peaceful reunification of the two sides ... but we will never allow anyone to separate Taiwan from the motherland in any name or by any means."

Zhou also noted that many "China-related" trade protection bills have been introduced in the US Congress.

Americans are worried by claims that Beijing's low valuation of the yuan, its currency, makes Chinese goods cheaper in the US and US products more expensive in China. US lawmakers are considering bills that would punish China for what they contend are predatory trade practices blamed for contributing to the loss of millions of manufacturing jobs.

"The growing protectionist sentiments and the tendency to politicize economic and trade issues are especially worrisome," Zhou said.

Most of Zhou's roughly 40-minute talk focused on China's contributions to a number of world affairs, including negotiations between the two Koreas and improved relationships with Japan, India and Russia.

"We are ready to join hands with people across the world to promote the building of a harmonious world of enduring peace and a common prosperity," he said. "This is China's policy and long-term strategy."

He also said China has contributed more than 9,000 peacekeepers to UN operations around the globe.

"Working together, China and the United States effectively safeguard and enhance the peace, stability and the prosperity in the Asia-Pacific region and the rest of the world," he said.

Two protesters were quickly escorted out of the auditorium when they stood up while Zhou answered questions by the audience about human rights abuses in China.

Learn from Chinese investments in the US
　

By Honigmann Tsai-lung Hong 洪財隆
Sunday, Feb 24, 2008, Page 8

Although calls for relaxation of restrictions on two-way investment between Taiwan and China are becoming de rigueur, concerns remain about how far and how fast the ban should be lifted. Other concerns include the nature of the international capital, the structure of China's foreign investments and the cross-strait relationship.

Recently, sovereign wealth funds worth up to US$2.5 trillion have been set up by China, Russia, Persian Gulf countries and Singapore and have acquired financial assets in other countries -- particularly in developed countries -- and merged with well-known enterprises or invested in strategically important industries. Such investment behavior has raised economic and even national security concerns in free and open countries such as the US.

Former US Treasury secretary and noted economist Lawrence Summers has described this phenomenon as "cross-border nationalization." He has called on the IMF and other international organizations to work out a code of conduct. It is therefore clear that the problems are serious.

In recent years, China has become the largest recipient of foreign direct investment (FDI) among developing countries and the fourth largest in the world, after the US, the UK and France.

In 2006, China alone saw an FDI of US$78.1 billion, 6 percent of the global share. With accumulated foreign exchange reserves of approximately US$1.5 trillion -- mainly from the nation's trade surplus -- China has gradually been willing and able to invest abroad.

In 2006, China's foreign investment reached US$20 billion, ranking 13th in the world. Investments were mainly in Asia and Latin America, concentrated in the fields of energy and strategic materials.

Although investment performance has been pretty good for a beginner, we can say China's foreign investment is still relatively small. It is because many countries are still wary of the "China threat" and, most importantly, because China still maintains strict controls on capital transfers and capital accounts, especially for private capital.

For instance, China bans residents from directly investing abroad. In addition, private enterprises are still not active enough to support the relatively delicate overseas investments. In 2004, for example, non-government enterprises only accounted for one-fifth of the nation's listed companies. Despite their limited international experience, state-owned enterprises still play a primary role in China's foreign investment, while non-government enterprises only make up one percent of the nation's total investment.

China's blatant state control of the foreign investment structure has led several US lawmakers to urge the US Committee on Foreign Investment to be highly vigilant of Chinese investments as they could pose a threat to the nation's economic security.

In particular, China's political motivation is likely to be greater than its business concern, which usually serves as a good cover for officials initiating an investigation. The US government is concerned about not only Chinese investment, but also China's industrial espionage, which could result in US state-of-the-art military technology being leaked to a third country if a company were later bought out.

However, this has led China to change its investment strategy when acquiring US enterprises. For example, Chinese companies intentionally grab less than 10 percent of market share to avoid holding management rights. They may have a third partner involved in the investment to diminish US concerns.

As far as Chinese capital investment in Taiwan is concerned, the real estate, securities and equities and real business sectors have received a great deal of attention in recent years. Since August 2002, Taiwan has officially opened up to China capital investment in real estate. Yet tedious application procedures for Chinese investment and strict restrictions on outgoing capital from China have hampered the process. As a result of these barriers, fewer than 10 transactions have been successfully completed over the years.

Until now, Taiwan has not deregulated short term Chinese investment in stocks and bonds and long term investment in the manufacturing industries. Since two-way communication plays an important role in economic activities, it is expected that Taiwan will move toward further liberaliza-tion. Ideally, Chinese investment in Taiwan may cause personnel movement, services and trade opportunities, profit repatriation or taxation, and thus perhaps balance the situation.

However, looking at global trends and past experience in cross-strait relations and the nature of China's economy, we should impose strict regulations on Chinese investments through state-run enterprises and sovereign wealth funds. It is even more essential that we learn from how the US has handled foreign and Chinese investments through legislation and policies.

Honigmann Tsai-lung Hong is an associate research fellow at the international affairs division of the Taiwan Institute of Economic Research.