Foreign firms' cash locked in China

International businesses are starting to make money in China but that brings with it a new set of problems, says Citigroup's head of global transaction services for Asia Pacific, Shayne Elliott.

Elliott, a Hong Kong-based New Zealander, returns this week to speak at the Inside China conference at the Hilton Hotel in Auckland tomorrow.

He said that 10 years ago a lot of businesses set up in China to take advantage of the economic boom but most lost a lot of money.

Some like Affco and beer brewer Lion were forced to give up and leave. But things were starting to change.

Elliott said international corporations were starting to turn a profit. The difficulty was deciding what to do with the cash.

Taking money out of China was not as easy as getting it in.

The Government strictly controlled foreign currency through specially designated accounts that had a maximum cap on the amount of money they could hold.

Elliott and his team do a lot of work helping clients reinvest excess cash in China in ways that can still help the bottom line of their international business.

But the currency rules are changing.

Things happen so quickly that Elliott has already had to update his speech notes for the conference to accommodate changes made in the past two weeks.

He said another surprising problem that businesses were facing in China was a shortage of staff.

"It's not something you think of when you think of China," Elliott said. "But, without exception, our clients are saying it's a big problem."

As rural centres in China started to get wealthier there was no longer the same push for skilled rural people to head for the cities.

That, combined with increased competition for skilled workers from multinationals, had led to a shortage of professionals such as accountants, lawyers and bankers.