Service Sectors in China Will Reign

The Wall Street Journal ran an excellent piece by Andrew Browne yesterday on foreign direct investment in China. The article talks about how foreign direct investment in China hit $60.33 billion in 2005. 

We especially like two points that he makes because, well, because they reinforce two things we are always saying about China.

The first is that "many economists believe that foreign direct investment will shift increasingly toward the services sector, including financial services and health care, where foreign companies can make full use of their strengths in innovation, product design and development, high technology and management know-how."  We completely agree and we can see this in our own law practice.  Beginning around six months ago, we started seeing a greater proportion of people coming to us for China legal assistance from service industries like graphic design, food brokering, environmental engineering, architecture, money transfers, media, transportation logistics, and consulting, as opposed to manufacturing. 

Chinese service companies are generally not yet as sophisticated as Western, Korean, and Japanese companies and we are extremely bullish on foreign service companies going into China.  In a later post, we will talk about how China's company laws have only recently become far more liberal in allowing foreign service investment.  Service is the next wave.

The other statement we particularly liked in this article was that "as China becomes the world's biggest market for a growing number of products, many of the world's largest companies believe they have to invest in China or risk losing global leadership."   We heartily concur and would go even further by saying that all companies, regardless of size, should consider how China might boost sales and/or reduce costs. 

Comments

[Alexander Aginsky]

FDI is shifting to the Services sector in many emerging markets, from India to Russia, due to more and more emphasis on education and value-added services everywhere. In particular, the CIS has also experienced a similar shift. Retailing is one of the fastest growing sectors of the Russian economy, outpacing the growth in natural resources. This trend is not new, but has been well on the way for the last several years. We are seeing this both with our own clients and in general.

Alexander Aginsky
www.aginskyconsulting.com

[Kimberly Frascarelli]

All of the new posts are both entertaining and insightful. I look forward to my FeedBlitz updates and check all of the links to read the articles. I feel so well-informed. Thank you again. Great work!