Foreign Direct Investment

Foreign Direct Investment

October 2, 2005

Learned from an investment official that as of 11/04, China had approved 55,000 foreign direct investment (FDI) projects, with total value of more than $1.5 trillion.

That’s about $1200 in additional capital per person in China, one reason China’s productivity and incomes are growing so fast.

Why is capital flowing to Asia? Capital per worker is so scarce there that returns are huge–the mirror image of relatively low real wage rates. And the government has been taking steps to systematically reduce risks for foreign investors.

We are not competing for jobs with China. We are competing for capital.

JR

John Rutledge

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