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The Global Economy Will Benefit From Chinese Investment Abroad

November 11, 2010: 12:34 AM EST

Chinese companies, many of which are state-run, accounted for 10 percent of the value of cross-border acquisitions this year. Cross-border deals often generate concerns, and the growth in the global influence of what people see as communist-controlled enterprises is regarded as unacceptable in some quarters, partly because many are worried that politics will influence decisions more than profits. Some countries, including Australia and Canada, are creating obstacles to Chinese investment, especially in primary industry. But there are good reasons why the trend should be allowed to continue. First, the current economic malaise in the world has been partly attributed to economic liberalism, giving a boost to those advocating more state capitalism. Second, Chinese companies are relatively new to the scene and far from being able to influence supply conditions significantly. Third, many state-run companies in China have to compete at home too, and competition in foreign markets should ensure that Chinese investments are profit-oriented. Fourth, some of the Chinese investment is coming from the private sector, such as Geely, the new owner of Volvo.  Finally, the global economy needs the capital and energy that Chinese investment should bring.

"China buys up the world", The Economist, November 11, 2010, © The Economist Newspaper Limited
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