China Esquire

Another news story that confirms to me the need for all people to be well versed in the use of WFOE’s and JV’s as investment vehicles for China. This one is is from the BBC and talks about how foreign investment grew 38.3% from a year earlier (which is a pretty astounding number if you ask me).

Thispicks up on the divide between WFOE and JV supporters. (key lesson from that: a lot of it depends on the circumstances, whether your client is an MNC or SME, the role of your Chinese partner, etc.–do not assume that one answer fits all)

Here is the brief article on foreign investment:

Foreign investment in China grew 38.3% in February from a year earlier thanks to a stronger yuan and large projects, the Commerce Ministry has said.

February’s $6.9bn (£3.4bn) figure was well behind January, when it more than doubled to $11.2bn. In January and February, investment grew by 75.2%.

The yuan has been allowed to appreciate 3% against the US dollar since January, which has attracted funds to China.

Also, firms have moved to China to cut costs and tap into growing demand.

Foreign companies are now looking at China as less of a base for low-cost manufacturing, and more as an opportunity to sell goods to a population with rising disposable incomes.

Commerce Minister Chen Deming put the jump in investment down to the yuan strengthening and an increase in large projects.

Analysts said that further gains in the currency would tempt greater foreign investment.

The most interesting line in there, aside from the fact that the growth is astounding, is that FDI is occurring because companies are looking to China as “an opportunity to sell goods to a population with rising disposable incomes.” Well, I know that no one has quite cracked the Chinese market, but someone has to figure it out eventually. It’s not so much a development as it is interesting to me–it only is a matter of time before a foreign company cracks the code on the Chinese market–especially the growing middle class. (see this article on the growth of the middle class, h/t to Bill Dodson) After all, retail sales seems to lag the FDI growth at a modest 20.2%. (forgive my sarcasm)

So quite an increase of investment in China. Now the question is, to catch that growth, WFOE or JV?

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