The challenges Chile poses to Chinese investors
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Considering the huge potential for FDI flows from China, it is important that the different Chilean and Chinese public and private institutions continue to work together to identify opportunities and challenges, thereby facilitating the arrival of more Chinese investment in Chile.
China is Chile’s foremost trading partner and in recent years Chinese investment in Chile has also become of increasing importance. That said, there are still barriers to further increasing China’s foreign direct investment (FDI) in the country.
First of all, the two countries have very different business models. In China, the government has a more participatory role in the private sector. In Chile, however, business is done through public tenders or negotiations between private parties, so Chinese companies are having to get to grips with operating in an unfamiliar environment. For instance, in the area of infrastructure, Chinese companies are accustomed to being contractors for Engineering, Procurement and Construction (EPC) projects, and it is only recently that a trend has been seen for them to move from being contractors to investors. In other words, they are learning how to function within Chile’s concession model. Furthermore, Chinese state-owned companies are accustomed to doing business through government-linked contracts, but this is not how business is done in Chile.
Second, various permits and approvals are required in order to establish a large project in Chile. This is still difficult for Chinese companies to “navigate” and they often prefer to invest by acquiring a project or company directly, rather than developing an initiative from the ground up (greenfield).
Third, Chinese investors still lack key information about Chile. While this shortfall has diminished in recent years, Chinese companies still need to become — and stay — more informed about the specific opportunities available in Chile, and the projects that could be developed here.
Finally, it is worth noting that the Chinese state promotes and supports Chinese investment overseas, especially in the areas of infrastructure, high technology, advanced manufacturing, R&D centres, energy, agriculture and services. However, it places restrictions on investments in such areas as real estate, hotels, cinemas, entertainment and sports clubs. In addition, in order to invest abroad, companies generally need to obtain a series of approvals and registrations from the Chinese government.
I believe it is crucial to building bridges with Chinese companies, generating relationships of trust and providing specialized guidance in order to reduce the aspect that most divides us, which is not so much about distance but rather about the information available. Considering the major potential for FDI flows from China, it is important that the different Chilean and Chinese public and private institutions continue to work together to identify opportunities and challenges, thereby facilitating the arrival of more Chinese investment for Chile’s different productive sectors.
Source: Diario Financiero
Post available in: English