Thursday, May 31, 2007

Big Profits - But Who Should Get Them?

This was a post by Jeremy Gordon on the China Business Blog, at the end of last December. he writes that many American companies in China, and European ones as well, but they also be careful and obey the policies of the government of China.

We already know that foreign businesses in China are profitable, but US companies’ corporate profits were over US$2 billion in the fist half of 2006 – up over 50 percent on the same period in 2005 - according to a report in USA Today (via China Daily) that is based on research from the US Bureau of Economic Analysis.

Foreigners are, of course happy to be making profits, and that it why they planned moves to China in the first place. However, big profits have a political element to them, and many in China have already been questioning the role of foreign investment and have been angered by the selling off of Chinese state assets to big foreign banks and other “strategic” investors – who can see huge profits almost over night. This is partly why Carlyle was blocked from taking control of Xugong, and why ICBC had a Shanghai listing at the same time as the Hong Kong one.

While the debate continues (and after it finishes) I will repeat my advice that foreign firms in China need to watch policy closely, and remain sensitive to local perceptions of their activities and their economic and social impact. A helping hand is likely to be viewed in a different light from a simple grab for some under-valued assets.

To view the entire article at its original location click on the title of this post.

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