August 25, 2009

China's outbound investment to exceed FDI for first time in 2009

Against the backdrop of the international financial crisis, China's outbound direct investment is expanding rapidly while international capital flow, transnational investment, and mergers and acquisitions are dropping sharply. This year, China's outbound foreign direct investment (FDI) is expected to exceed FDI into China for the first time, reaching 150 billion U.S. dollars.

China's actual use of FDI amounted to 48.4 billion U.S. dollars in the first seven months of the year, down by 20 percent over the same period last year.

China's overseas investment reached 52.1 billion U.S. dollars in 2008, nearly double that of 2007.

China's outbound investment has upgraded from its early stage into a stage of rapid development, and China's role in the global economy will shift from "manufacturer" to "capital exporter."

Fan Chunyong, standing director of China Industrial Overseas Development and Planning Association explained the reasons for that. Firstly, 30 years of economic development has enabled China to accumulate a large amount of capital. Chinese capital will naturally flow overseas if that market has lower cost and higher profit than domestic investment.

Secondly, with increasing economic globalization, China has broad access to the transnational production processes and global production networks. Chinese companies have a strategic need to invest in overseas upstream production and downstream markets to guarantee the stability of their supply chains and target markets, and prevent external factors from causing uncertainty in their overall production and operation.

Thirdly, against the backdrop of the global financial crisis, many countries are facing serious funding shortages and have huge demand for foreign capital. At present, many foreign enterprises are successively coming to China to find buyers. Holding the world's highest foreign exchange reserve of almost 2 trillion dollars, China has plentiful capital.

In addition, costs for capital market are relatively low due to the strong Chinese currency. All of these factors are naturally driving Chinese enterprises to seize overseas investment opportunities.

By People's Daily Online