THE CEO of China’s largest bank has called for more direct investment from his country into the resource-rich regions of the world – primarily Australia, Africa and Latin America – in order to avoid the ”resource bottlenecks” that are hurting China’s economy.

As the breakneck speed of China’s economic boom starts to slow – this week major players in the country’s steel industry revealed they are struggling to make a profit – Jian Jianqing, chief executive of Industrial and Commercial Bank of China, has called for increased foreign investment to secure vital natural resources.

Mr Jian also said China should follow the lead of Japan in the 1980s and manufacture overseas to avoid political backlash and potential trade barriers from developed nations. He cited the Japanese car industry, which has built factories around the world.

”The government should use preferential policy to encourage companies to invest in resources-rich regions. Intensifying the investment in natural resources could help China to overcome resources bottleneck during the period of its rapid industrialisation,” Mr Jian wrote in an article for Caijing magazine.

Mr Jian argued that more Chinese investment abroad could address the country’s over-reliance on exports and domestic investment in construction.

Mr Jian also urged better management of the Chinese investment projects abroad through enhanced legal and policy frameworks.

”The government should provide better support to privately-owned firms’ investing,” he said.

”The state-owned enterprises should be held accountable for their investment decisions from the perspective of shareholders.”

Laurie Pearcey, the CEO of Australia China Business Council, said Beijing had tightened up its outbound investment process and companies had been asked to undertake more due diligence before committing themselves to projects in Australia & abroad generally.

”National Development and Reform Commission [the key ministry responsible for overseas investment] is applying a much more robust due diligence test when it comes to approving Chinese investment offshore. Chinese businesses need to demonstrate the commercial feasibility of the project and good cost management,” said Mr Pearcey.

Australia is now the single largest destination for direct Chinese investment. The Foreign Investment Review Board had approved more than $60 billion worth of Chinese investment projects under the current Labor government and mostly in natural resources as of late last year.

A total of $US34 billion was invested here between January 2005 and December 2010, according to Heritage Foundation, an American think tank. The Economist intelligence unit also ranked Australia as the largest Chinese foreign direct investment destination outside of Asia.

That rate of investment has slowed, in the aftermath of a string of bad Chinese investments in Australia.

The head of Sinosteel, Huang Tianwen, a major Chinese state-owned enterprise and an investor in Australia, reportedly lost his job due to investments that had gone belly-up in WA.

ICBC, considered the world’s biggest bank, has more than 16,000 branches in China, with 260 million personal customers. Its rapid expansion in Australia has seen assets increase from $630 million in 2009 to $3.5 billion this year.

Sourced & published by Henry Sapiecha