L1-China&39;s Economic Conditions(8)

Table 2. Comparisons of United States, Japanese, and Chinese GDP

and Per Capita GDP in Nominal U.S. Dollars and PPP, 2005

CountryUnited StatesJapanChina

Nominal GDP($ billions)

12,4734,6051,912

GDP in PPP($ billions)

12,4734,0218,116

Nominal PerCapita GDP

42,18036,1501,460

Per Capita GDP

in PPP

42,18031,5606,210

Source: Economist Intelligence Unit Data Services. 2005 data are estimates.

Note: PPP data for China should be interpreted with caution. China is not a fully developed market economy;the prices of many goods and services are distorted due to price controls and government subsidies.

Foreign Direct Investment in China

China’s trade and investment reforms and incentives led to a surge in foreign directinvestment (FDI), which has been a major source of China’s capital growth. Annual utilizedFDI in China grew from $636 million in 1983 to $61 billion in 2004 (it was estimated at $58billion in 2005). The cumulative level of FDI in China stood at about $618 billion at the endof 2005. Analysts predict that FDI will continue to pour into China as investment barriersare reduced under China’s WTO commitments and Chinese demand for imports continuesto increase.

Based on cumulative FDI for 1979-2004, about 43% of FDI in China has come fromHong Kong. The United States is the second-largest overall investor in China, accountingfor 8.5% ($48.0 billion) of total FDI, followed by Japan ($46.8 billion), Taiwan ($39.6billion), and the British Virgin Islands ($36.9 billion) and South Korea ($25.9 billion) (seeTable 3).3 U.S. FDI in China for 2004 was $3.9 billion, accounting for 6.1% of FDI for thatyear, and ranked 5th after Hong Kong, the British Virgin Islands, South Korea, and Japan.4During the first 10 months of 2005, the top foreign investors in China (in terms of realizedFDI) were Hong Kong, the British Virgin Islands, Japan, South Korea, and the United States.Actual U.S. FDI in China was down by 24% over the same period in 2004, althoughcontractual FDI was up by 10.5%.

3

According to the Chinese Ministry of Commerce, major U.S. investors in China (based on 2003sales volumes) include Motorola ($5.8 billion in sales volume), General Motors ($2.2 billion), DellComputer ($2.1 billion), Hewlett Packard ($1.3 billion), and Kodak ($0.6 billion).

The British Virgin Islands is a large source of FDI because of its status as a tax haven. Much ofthe FDI originating from Hong Kong comes from non-Hong Kong investors, such as Taiwanese.

4