China becomes new major investor in LatAm: UN body

MEXICO CITY, May 5 (Agencies): China has become one of the most important investors in Latin America and the Caribbean accounting for almost 9 per cent of the total investment flow to the region in 2010, the United Nations Economic Commission for Latin America and the Caribbean (ECLAC) said Wednesday. "In 2010 Chinese companies invested about 15 billion US dollars in countries in Latin America and the Caribbean, basically through mergers and acquisitions," said the ECLAC in a new report published here Wednesday. It said that more than 90 per cent of Chinese investments in Latin America have been used toward the extraction of natural resources, especially in mining, but China is expected to start diversifying investments into a lot of new areas in the years to come. "In the medium term it is expected that the transnational companies of that country (China) will continue to reach the region and that they diversify towards the infrastructure and manufacturing sectors," it added. The ECLAC said that the flows of investment is reinforcing the production of specialised items in the region, but it did not provide any example of this. It added that by 2011 the direct foreign investment in the region is expected to grow between 15 per cent and 25 per cent compared to 2010, but the region still has to apply policies that will focus on innovations that can help absorb improved benefits of this capital flow. The main investor in the region is the United States with 17 per cent of the total value, followed by the Netherlands with 13 per cent, China with 9 per cent and Canada and Spain each with 4 per cent. Washington report says: Tens of billions of dollars of Chinese investment could flood into the United States in the next decade, creating a multitude of American jobs if officials do not succumb to a political backlash and throw up barriers, according to a report. The study forecast Chinese companies would unleash some $1 trillion to $2 trillion in new greenfield investments or mergers and acquisitions around the world by 2020. That would be a four- to eight-fold increase of China's current outward investment of about $230 billion, according to the report done for the Asia Society, the Kissinger Institute on China and the United States and the Woodrow Wilson International Centre for Scholars. "If just 5 per cent of China's expected outflows target the United States over the coming decade, the numbers will be enormous," the report's authors, economists Daniel Rosen and Thilo Hanemann, said. The coming wave could cause even more political heartburn than happened in the early 1980s, when Japanese companies began making substantial investments in the United States. But US policymakers should keep an "open door" to Chinese investment and the potentially huge job-creating benefits by shielding the US system for reviewing foreign investments from political interference, Rosen and Hanemann said. "Japan's first investments in the United States during the 1980s were almost as controversial as China's but in the following years, Japanese US affiliates put $1 trillion into America and today employ nearly 700,000 Americans," they said. The report, released ahead of high-level talks between US and Chinese officials in Washington next week, urged the US Congress and the White House to send a clear bipartisan message that Chinese investment is welcome in the United States. China is already the biggest foreign buyer of US government debt with holdings of more than $1.1 trillion as early 2011. But US statistics showed just $2.3 billion in Chinese direct investments in companies with operations in the United States at the end of 2009, the report said. That is approximately 0.1 per cent of the $2.3 trillion in total foreign direct investment, or FDI, in the United States. Many Chinese companies are wary of investing in the United States because of the political outcry caused by some previous high-profile forays, such as Chinese oil company CNOOC's unsuccessful attempt to acquire Unocal in 2005.