Monday, October 03, 2005

China Fudged its FDI Numbers

The Business Standard has carried a story on its front page on how an UNCTAD study has shown that China has been fudging (Enron-ing if you may) its FDI numbers by as much as 89%... No wonder their financial system is a mess.

Some quotes from the article:

China claims that it got FDI worth $5.42 billion from the US in 2002. But the US says it has invested a meagre $924 million during the period, Unctad’s World Investment Report 2005, says.

The OECD report states, “MOFCOM (ministry of commerce of the People’s Republic of China) FDI statistics are not based on the internationally recognised standards that are generally applied by OECD countries. Consequently, the differences in the statistics compiled by OECD countries on their investment in China and the statistics published by MOFCOM on OECD members investment in China show serious inconsistencies between these sources.”

The same topic was also covered in an PGSM elective course - International Business - where Prof Murali Patibandla had some readings for us on the history and evolution of China's FDI story.
A similar point made at that point was that a lot of China's FDI is actually a case of round-routing of money to outside China and then back to China as foreign direct investment to take advantage of the differential tax and property laws.
Prof Vivek Moorthy had covered some of this in a separate course, Global Financial Markets.

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