China to act as Asia's investment spur


Tretiak believes China will attract more than $60 billion a year in overseas investment by 2004

By Alex Frew McMillan

HONG KONG, China (CNN) -- China's economy will grow at 7.5 percent this year, a rate that will continue to attract heavy foreign capital, the Economist Corporate Network heard here.

Strong competition from China for investment will force other Asian nations to offer tax breaks to overseas companies, according to Lois Dougan Tretiak, the Economist Group's Beijing-based representative.

World Trade Organization entry has left many Chinese companies looking for overseas capital, technology and management methods.

Industries such as banking, insurance and agriculture face severe competition and are looking for overseas backing and advice as China opens its market.

Tretiak said that effect means foreign direct investment (FDI) in China will hit $50.6 billion in 2002, an 8 percent rise over the year before.

Pace to pick up

The pace will pick up 11 percent in 2003 and 12 percent in 2004, Tretiak's forecasts show, reaching $62.9 billion that year.

Other Asian economies may have to counter the "China effect" to make sure they aren't left behind.


Tretiak was giving her forecast in Hong Kong, which she feels needs to go back to basics such as its deep-water port to remain competitive

"It's going to make the countries of Southeast Asia pick up their socks, and make them offer more to the investor," she said after giving her strategic forecast for the region.

"Those economies will have to find out where they fit," she said, by targeting specific industries in which they have a competitive advantage.

The implications span to Japan and North Asia, tood. Hong Kong, for instance, should focus on its deep-water port and its "basics," she believes.

But China's emergence as a regional force will ultimately be positive for most of Asia, according to Tretiak.

Stealing Asian limelight

China is increasingly stealing the Asian spotlight from Japan, thanks to that economy's sluggishness over the last decade.

Tretiak's counterpart in Japan, David Satterwhite, told CNN that the chances are better than even Japan will sink back into recession this year.

A yen that gets as strong as 110 to the U.S. dollar in the next six months will mean the end of an export-driven recovery, Satterwhite said. (Full story)

A stock selloff could induce a banking crisis, a Bank of America expert told CNN on Wednesday, if the Nikkei hits 8,100. (Full story)

But the conference speakers were quick to point out that China will not usurp Japan's mantle in Asia anytime soon.

China's economy is now $1 trillion -- large, but a far cry from Japan's roughly $4 trillion output and the $10 trillion of the United States.

"That is putting the economies in perspective," Tretiak said. "Japan is still the second largest economy in the world. A Japan in the doldrums isn't going to become the fifth-largest economy."