Denise Tsang firstname.lastname@example.org
US President Barack Obama proclaimed America had usurped China as the world’s No 1 investment destination, a bold statement that left some economists scratching their heads.
The White House cited an AT Kearney survey as the basis for Obama’s remark in his State of the Union address on Tuesday, noting the US topped the global consulting firm’s list for expected foreign direct investment.
But the US ranks lower in other prominent surveys. Forbes’ annual report on the best country to do business in put Ireland at the top, with the US at No 14, according to Politico’s website. It also noted that the Milken Institute – which measures countries on 67 variables, including economic fundamentals and regulations – put the United States at No 22, behind Hong Kong at No 1.
Obama kicked off his speech with a list of his administration’s economic achievements.
“Here are the results of your efforts: the lowest unemployment rate in over five years. A rebounding housing market. A manufacturing sector that’s adding jobs for the first time since the 1990s. More oil produced at home than we buy from the rest of the world – the first time that’s happened in nearly 20 years…,” Obama said. “And for the first time in over a decade, business leaders around the world have declared that China is no longer the world’s number one place to invest; America is.”
The statement pacified some Americans’ concerns in the past couple of years that “China is eating America’s lunch”, but it triggered a fierce debate.
RBS economist Louis Kuijs said despite the fact that the United States is emerging from the 2008 global financial crisis and is on track for an economic upturn this year, hurdles remain to making it the world’s top investment destination.
“The US has made progress in economic recovery, which makes itself a more attractive place for investments,” Kuijs said. “Many federal governments are quite keen on attracting investments and manufacturing as energy prices are lower.”
However, lower energy costs, thanks to abundant supply of shale gas, are not the sole factor. There are others such as wages and availability of supply chain services, he said.
He added that the mainland’s sophisticated and advanced logistics and supply chain network makes it more favourable in manufacturing activities.
“The supply networks were lost along with the demise of many manufacturing activities in the US many years ago,” Kuijs said. “It is not easy to bring more jobs back to the US.”
The US is more suitable for developing some petrochemical-related industries, he said.
US-based financial services firm Brown Brothers Harriman strategist Marc Chandler saw the US as the best investment location by some measures such as low unit labour costs, cheap energy, higher legal transparency and signs of manufacturing activities returning to the country.
“Many worried about a bubbling debt problem, quicker deterioration in demography, poor stock market and unstable money market in China,” he said.
However, Wilson Tong , a professor with Hong Kong Polytechnic University’s School of Accounting and Finance, has faith in China’s attractiveness on the world’s economic stage. He says because the US is unwinding its quantitative easing measures, capital is naturally flowing back to the country.