Jiang to pitch 'go west' to investors

By CNN's Geoff Hiscock, Asia business editor

HONG KONG, China - Chinese president Jiang Zemin is likely to urge foreign investors to "go west" into China's heartland when he delivers the keynote address Tuesday night at the Fortune Global Forum.

Jiang, who arrived in Hong Kong just before midday Tuesday for a 32-hour visit, will deliver a pep talk on the Chinese economy designed to keep foreign investment flowing into the country.

China was the developing world's largest recipient of foreign investment last year, with inflows of about $50 billion.

Much of that investment goes into export-orientated manufacturing plants, reflecting the fact that while China's focus remains its huge domestic economy, it has also become a massive exporter -- particularly to the United States and Japan.

Targets include infrastructure

Part of Jiang's pep talk will be to extol the benefits of China's western provinces, particularly as targets for investors in agriculture, water resources, power generation, transport and other infrastructure sectors.

China's economy is expected to grow at between 7.5 and 8.0 percent this year. But that figure masks the vast discrepancy between growth rates in the eastern provinces' economic hot zones, and the much poorer western provinces.

Jiang and his premier Zhu Rongji know that if China is to have a real chance of keeping the country together while the painful process of state enterprise reform unfolds, then stronger economic growth in the west will be crucial.

Jiang is unlikely to make too much of last month's spy plane incident in his pitch to foreign investors -- he needs capital and advanced technology, rather than reminding investors of the inherent dangers of doing business in China.

But will U.S. investors, for example, be keen to "go west" in the current political climate?

They may - if they think that the central government in Beijing is genuinely keen to expose China's less-developed provinces to foreign funds, expertise and business practices.

Massive trade surplus

The U.S.-China trade relationship is one of the biggest in the world, and China is running a massive trade surplus with the U.S. Political risk is a given - particularly for U.S. companies. The challenge for Jiang is to convince investors that the rewards outweigh the risk in sectors such as telecommunications, manufacturing, financial services, agriculture and infrastructure projects.

U.S. involvement in these sectors, while not essential, is certainly desirable if China wants -- as it does -- the latest technology.

Allied to this is China's long-awaited entry to the World Trade Organization.

The latest expectation now is for entry some time in the second half of this year. But WTO watchers know that unexpected delays have been part and parcel of China's tortuous route to full membership of the international trade community.

Jiang's address to the Fortune Global Forum Tuesday night will likely set the tone for the sessions that follow on Wednesday and Thursday. If he is confident and bullish about China's growth prospects, then the mood will be bright.

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