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Leaders Look To China's Investments Abroad

Thu, 01/26/2012 - 8:31am
Frank Jordans, Associated Press

DAVOS, Switzerland (AP) — Chinese investment abroad is drawing scrutiny as global leaders increasingly look to China to prop up the world economy, even as some remain wary of the country's dominance.

The head of one of China's biggest private equity firms said Thursday that foreign prejudice about Chinese investment is unfair and that Chinese investors are still learning a game that much of the world has been playing for decades.

Worries that Europe's slowdown would hurt stronger economies are overshadowing discussions at this week's World Economic Forum in the Swiss ski resort of Davos. Attention turned Thursday to how China can help.

Chinese companies and government funds have been using vast reserves of cash to buy up foreign companies and invest in foreign government bonds in recent years. But with billions of dollars in Chinese investments pouring into their countries, some governments have accused China of seeking to exploit the economic weakness of others to grab valuable natural and technological resources at rock bottom prices.

President Barack Obama's administration also has repeatedly accused China of breaking global trade rules by giving unfair protection to its companies and domestic workers.

"The vast majority of Chinese companies are trying to follow the rules as they understand it," said John Zhao, CEO of Hony Capital. "But many Chinese companies are still trying to learn the rules." His company controls PC maker Lenovo, which bought IBM's computer division in 2005.

The director general of the World Trade Organization, Pascal Lamy, said China will continue to face "public perception problems" from its investments abroad.

"We will see in the years to come, as China's investments grow and grow. ... We will have the same sort of political turbulences as we have had on trade for the last 10 years," he said.

One way for China to ease the rest of the world's fears about its extravagant corporate shopping sprees is be more open about its vast poverty problem at home, said Lamy.

"In order for this to result in a win-win game a number of public perception issues have to be addressed," he said.

Nasdaq CEO Robert Greifeld reminded listeners that China's companies aren't the only ones with a reputation problem.

"We in the Western world have had a long tradition of corporate misdeeds," he said, citing Enron in the United States and Parmalat of Italy — both of which collapsed after years of hiding massive holes in their accounts.

Yale President Richard C. Levin suggested the rest of the world could be grateful for China's investment interest, as eventually the country of more than 1 billion people will have to start spending more of its cash on problems at home, including the lack of proper social security for an aging population.

"Some fraction of these trillions could be used domestically," he said.

The head of the Asian Development Bank said Asia already has been affected by the ongoing European financial crisis in two ways — through the withdrawal of credit in Asia by many European banks and financial institutions, and a drop in trade, which will impact China because Europe is its largest export market.

"I really hope that the European financial crisis can be overcome," Haruhiko Kuroda said in an interview with The Associated Press.

British Prime Minister David Cameron, whose country doesn't use the troubled euro, urged the eurozone to impose fiscal discipline and integrate its budget policies more, and expressed support for jointly issued eurobonds.

Cameron defended "genuine market capitalism" against those who favor "state capitalism" such as that practiced in China or Russia. He said free-market countries with rule of law where governments can be successfully challenged in court "have got to stand up and shout about their values. ... I don't think we should give up in this battle at all."

Cameron also joined Germany's Chancellor Angela Merkel in backing the idea of a free-trade deal between the European Union and the U.S., claiming that a trans-Atlantic pact could deliver a much-needed boost to global commerce.

The Davos forum, where business and political leaders gather every year in an invitation-only event, is under growing criticism by those who feel it's too removed from the real world.

Activists from Occupy Davos are camping out in igloos and yurts to call attention to income inequality.

"This is a man-made crisis and the people who have caused the crisis, many of whom are in Davos, should be held to account," said Salil Shetty, the secretary general of Amnesty International, told AP.

Leaders at the Davos forum are looking later Thursday at challenges to democratic institutions around the world, including such developments as the Occupy movement.

Nigerian Finance Minister Ngozi Okonjo-Iweala and other leaders appealed on behalf of the millions of people who do not have enough food to eat.

"The world can feed itself. Africa can feed itself. The problem is we have vulnerable populations who do not have access," Okonjo-Iweala said.

Malnourished people, particularly kids, are more susceptible to dying from malaria and other diseases in Africa, said Microsoft founder Bill Gates, whose philanthropy has mainly focused on promoting health. He pledged $750 million to the Geneva-based Global Fund to Fight AIDS, Tuberculosis and Malaria.

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