Doing business in China can be a difficult and contentious proposition for companies in many countries. Yet even with charges of intellectual property theft, forced partnerships and tight restrictions on doing business, China continues to attract foreign capital. Why do businesses want to invest in China when there are so many other “business-friendly” countries and financial markets that support foreign investment?
The United States has accused China of stealing the intellectual property of American firms, theft that is estimated at US$600 billion annually. As a precondition for doing business in China, American and other firms may be subjected to the forced transfer of their technology. In addition, regulations can require foreign investors to partner and set up a joint venture with a Chinese firm before they can do business in China.
Doing Business 2020, a publication of the World Bank, ranks China – in terms of the availability of credit and the ease and magnitude of tax payments – 80th and 105th, respectively, out of 190 nations in the world. Using 10 other indicators, such as protection offered to minority investors, registering property and enforcing contracts, China ranks 31st out of 190 nations in the world for the overall ease of doing business. By contrast, the U.S. ranks 6th out of 190, according to the same report.
Despite these negative business conditions, according to the 2020 World Investment Report, in 2018 and 2019 China attracted a staggering $138 billion and $141 billion in foreign investment, respectively. Focusing on just 2019, this massive foreign investment into China exceeds the GDPs of entire nations such as Kuwait – $137 billion; Kenya – $98 billion; and Venezuela – $70 billion. In 2019, China was the world’s second largest recipient of foreign investment, second only to the United States.
Source: The conversation (https://theconversation.com/)