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Friday, 17 September 2010

Incoming Investment

Wednesday of this week saw Airbus' chief executive officer Thomas Enders in Beijing to visit Chinese Vice-Premier Li Keqiang.  According to Xinhua, Li reiterated China's desire to improve opportunities for foreign investors in the country, with Thomas Enders apparently singling out China as a special focus for Airbus' activities in the future.  The same day also witnessed the company sign a new product contract with the CAC Commercial Aircraft Company (CCAC), one of China's largest aviation industry businesses (click here to read Airbus' official press release).  Clearly, the company is prepared to back up its chief executive's words with actions, and Airbus' willingness to further commit itself to the Chinese market is an excellent reflection of the increasingly Eastern-orientated focus of world economic affairs.

Li's statement fit with the comments made by both Vice-President Xi Jinping at UNCTAD 2 weeks ago and by Premier Wen Jiabao at the 4th World Economic Forum on Monday.  These earlier speeches highlighted the PRC's intention to encourage further investment by foreign companies by creating an open and fair business environment.  International corporations provide over 40 million jobs in China each year, making them essential to the success of the Chinese economy since the 'opening up' of the country 3 decades ago.

It is likely that other companies will follow the Airbus example and take advantage of China's ever-increasing willingness to allow foreign businesses into its markets.  By fostering good co-operative relations with firms like the CACC, these investors will link themselves to an economic environment that continues to buck the trend of world wide recession- a characteristic that looks unlikely to change anytime soon.  However, it is worth considering whether such an economic approach carries with it long-term dangers for the Chinese Communist Party.  With Chinese businesses reliant on the PRC's 'open' stance to reap the benefits of supranational co-operation, they have ever more of a stake in maintaining this status quo.  The Party's ability to keep control of the country is greatly enhanced by the boom that China is experiencing, but while at the moment it is firmly dominant over China's biggest business players, the CCP may find itself in the future more susceptible to the pressures of the Chinese economic sector when it comes to forming policy.  Chairman Mao once wrote that "the Party should command the gun"- it is not the dominance of the military that Party officials should be worrying about now.  Rather, with industry playing such a part in shaping the PRC's future, they should be wary of the Party finding itself being steered by the business community.

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