Chinese media, advertising, and urban life.

This article is by Pete Sweeney, a Fulbright Scholar researching business policy in Chengdu, China.

The surge of investment developing countries are pouring into more developed economies is a phenomenon that is receiving increasing attention. According to Kofi Annan's preface to the 2005 United Nations Committee for Trade and Development (UNCTAD) World Investment Report:

The conventional wisdom of developed countries as capital and technology exporters and developing countries as importers is gradually giving way to a more complex set of relationships. The geography of international investment flows is changing. Developing countries are emerging as outward investors, and their importance as recipients of foreign direct investment in more knowledge-intensive activities is increasing.

Outbound investment from the People's Republic of China is part of this trend. A recent article in the China Daily claimed that outbound investment from the BRIC countries (Brazil, Russia, India and China) and other developing nations is a "sign of a new world order." The claim sounds dramatic, but it is nevertheless indisputable. According to MOFCOM statistics compiled by Professor Lu Bo, Deputy Director of the Chinese Academy of International Trade and Economic Co-operation (CAITEC), China has established about 10 thousand companies in 172 countries and regions with a total investment of $90.63 billion. Thanks to its attraction of inbound investment and its accumulation of foreign currency reserves, China is now one of the world's largest sources of investment. This naturally includes investments in developing countries. "Nearly half of US capital inflows over the past year and a quarter came from China, Brazil, Mexico, and Russia," the Xinhua News article claimed.

Indeed, during the recent global economic downturn, driven by the subprime mortgage crisis in the United States, Chinese firms have emerged to inject cash into troubled firms like Morgan Stanley and Citigroup. Michael Heise, writing for the International Herald Tribune, called these firms "white knights from afar." "Is [this] something to fear?" asks Heise. "The answer is no, at least, not directly." If the Chinese Ministry of Commerce has its way, we are likely to see more of such Chinese knights in the near future. A recent article on the Chinese Council for the Promotion of International Trade (CCPIT) website quoted Fu Zi Ying, Vice Minister of the Ministry of Commerce (MOFCOM), who argued that the current economic crisis offered Chinese firms unprecedented M&A opportunities. "Several well-known enterprises and research organizations have fallen into difficult positions. This offers Chinese firms a great acquisition opportunity. These [Western] firms possess well-known brands, formidable international sales networks, and relatively strong research capabilities. If our firms can successfully acquire them, we can use these resources to greatly enhance Chinese firms' international competitiveness."

In the current political climate, however, Chinese firms still face obstacles investing in developed economies, particularly when it comes to taking control of US firms. The Committee on Foreign Investment in the United States (CFIUS) recently blocked an attempt by Huawei, a well-known Chinese telecommunications firm, from acquiring a $2.2bn stake in the US firm 3com, citing security concerns related to 3com's technology assets. Huawei is hardly the first Chinese firm to run into a wall when it comes to acquiring controlling stakes in US firms. The Chinese National Offshore Oil Corporation (CNOOC) attempted to acquire Unocal and was rebuffed due to security concerns. While not subject to a security review, Haier's attempt to acquire Maytag was politically unpopular in the US and was ultimately stymied.

Predictably, the Chinese are irritated and blame US protectionism and paranoia. Opinion in the US varies according to the speaker's assessment of Chinese intentions. In short, a lot of political sound and fury. What does it signify?