At the second preparatory meeting for the 10th China International Fair for Investment and Trade, China's only annual event focusing on promoting worldwide investment, Zhao Chuang, Deputy Director of the Department of Foreign Economic Cooperation of the Ministry of Commerce, discusses the prospects for Chinese enterprises' overseas investment with Beijing Review reporter Dai Xiaohua.

Beijing Review: Why has the Chinese Government proposed the strategy of optimizing foreign investment structure, expanding overseas investment and encouraging Chinese enterprises to "go global?"

Zhao Chuang: As we all know, introducing foreign direct investment (FDI) is an important part of China's opening up, a basic national policy. From 1978, when China's reform and opening up began, to the end of 2005, the Chinese Government had approved the establishment of more than 500,000 foreign-funded enterprises, with paid-in capital exceeding $270 billion. So far, more than 190 countries and regions have investments in China. The number of research and development centers foreign investors have set up in China tops 700, and more than 40 multinationals have established regional headquarters in the country. Most of the foreign-funded enterprises are performing well, and they are playing an increasingly important role in China's economy.

At the beginning of this century, according to the overall needs of China's peaceful development, the Chinese Government proposed the strategy of optimizing foreign investment structure, expanding overseas investment and encouraging Chinese enterprises to "go global." The strategy is of realistic importance and far-reaching significance for China to ensure a sustainable, sound and stable development, enhance its role in world affairs and develop a strategic partnership with other countries.

How has the "going global" strategy been implemented? Are there any problems?

In recent years, Chinese enterprises have expanded their presence in the international market and shown a strong momentum in investing abroad. Over the past few years, China's outward direct investment has grown at an annual average of 20 percent, with the highest yearly growth of 80 percent. Annual investment has averaged $6-7 billion. As of the end of 2005, outward direct investment by Chinese enterprises reached $51.7 billion. At this rate, China's annual overseas investment is expected to soar to $30 billion in 2020, ranking it among leading capital exporters in the world. The UN is optimistic about China's potential in this regard, listing it as one of the emerging investment sources.

But we should be clear-minded about the fact that China's overseas investment is still small in comparison with the foreign direct investment it has received, needless to say capital exports of developed countries. The above-mentioned total outward investment of $51.7 billion of China over the past few decades only accounted for that of the United States or Germany for one year. China still has a long way to go to become an investment source worthy of the name.

Chinese enterprises' "going global" strategy is welcomed by most foreign countries, especially developing ones. But some tend to politicize it. They consider normal business expansion of Chinese enterprises and their mergers and acquisitions of local businesses as a threat, and impose access barriers for Chinese investment. A typical example is the failed bid of China National Offshore Oil Corp. (CNOOC) to acquire U.S.-based Unocal Corp. Such a takeover deal is common in the international business world, but it was rejected by U.S. legislators for political concerns.

In addition, some local governments and departments haven't fully realized the importance of overseas investment. They habitually attach importance to introducing FDI, while being reluctant to support powerful enterprises to enter the world market, which affects the implementation of the "going global" strategy to some extent.

What are the main advantages and disadvantages for these externally oriented enterprises? What are the measures relevant government departments have taken to encourage them to invest abroad?

After nearly 30 years of reform and opening up, more and more Chinese enterprises, whether state-owned or privately owned, have the qualifications to enter the international market. So far, 10,000 Chinese enterprises have operated in 170 countries and regions, mostly in developing countries, and have performed well as a whole.

Chinese enterprises now have favorable conditions to compete in the international market. First, China's international status and reputation are on the rise, amid the growing recognition worldwide of its development achievements. Second, most of the Chinese enterprises preparing for overseas expansion are in sectors in which China has a comparable advantage, such as textiles, chemicals, energy and construction. Most of them have strong international competitiveness and their technologies are suitable for the target countries, especially those in the developing world. Third, with China's deeper integration into the world, many indigenous enterprises have adopted internationally recognized management systems. So standardized management, advanced technology and low labor costs combined to give them a competitive edge. In addition, most Chinese entrepreneurs are hard-working and innovative, and they believe in the management philosophy of mutual benefit, which makes it easy for them to enter in win-win cooperation with foreign partners.

Admittedly, there are also a number of failed attempts. Most of the defeats should largely be blamed on concerned enterprises' ' blind decision-making, rigid operational mechanisms and weak competitiveness.

In recent years, to support and encourage Chinese enterprises to invest overseas, relevant government departments have promulgated a series of incentive measures in the fields of business registration, financial assistance, insurance and taxation, which are all available on their websites for consultation and public supervision.

As the only investment event in China approved by UFI, the Global Association of the Exhibition Industry, what role has the China International Fair for Investment and Trade (CIFIT) played in promoting Chinese enterprises' investment overseas?

Sponsored by the Ministry of Commerce and held in the coastal city of Xiamen in Fujian Province, the CIFIT is an important platform for promoting bidirectional investment. In recent years, the fair's organizing committee has actively carried out the "going global" strategy, widely invited government institutions and investment promotion departments of foreign countries and regions, and held investment promotion meetings for different countries to introduce their investment policies and projects. Thus, Chinese enterprises can easily know about the investment information of foreign countries and regions, which can substantially reduce the cost for them to find investment projects.

In 2003, the CIFIT initiated the matchmaking symposium for investment projects, an effective platform for face-to-face business negotiations between developers and potential investors, with 107 Chinese enterprises participating that year. The number grew to 156 in 2004 and 179 in 2005. Target investment countries also increased year by year, with 73 in 2003, 85 in 2004 and 97 in 2005. The effect of the matchmaking symposium has become increasingly evident.

This year marks the 10th anniversary of the CIFIT. The organizing committee has strengthened its efforts in promoting Chinese enterprises to invest overseas. "Introducing FDI" and "going global" will still be the themes of this year's session, and several important forums in relation to the "going global" strategy will be held. One of them will focus on the African investment environment, which can help Chinese enterprises know more about the less developed but promising continent and encourage them to start up businesses there, in a bid to further strengthen China's traditional friendship with African countries.

As an important part of the Year of Russia program in China in 2006, another forum is scheduled to promote investment policies of Russia's special economic zones. China hopes the increase of Chinese investment in Russia can relieve the trade imbalance between the two countries. Meanwhile, there will be an economic and trade forum for Shanghai Cooperation Organization members, and an investment promotion symposium for Mexico. I believe these activities will be helpful in promoting Chinese enterprises to invest overseas.