Although China’s overseas direct investment (ODI) is still relatively small when compared to what it receives in foreign direct investment (FDI), the picture is changing.
The total value of FDI into China in 2011 was a record $116 billion, a rise of 9.2 percent over the previous year, according to government data.
China’s ODI last year was an estimated $72.4 billion.
In 2010 ODI surged 21.7 percent year on year to $68.81 billion, growing for the ninth straight year and recording an average annual growth rate of 49.9 percent, according to the Ministry of Commerce.
Over the last 10 years or so, Chinese companies have been gaining momentum in moving international capital and investing across a broad spectrum of sectors -- from natural resources to manufacturing to telecommunications and energy, just to name a few.
According to the government, by the end of 2010 Chinese enterprises had established 16,000 overseas companies in 178 countries, covering all economic sectors and focusing on six industries, including business service, banking, retail and wholesale, mining, manufacturing and transport.
Up until August 2011, investment by Chinese companies in Association of Southeast Asian Nations (ASEAN) countries totaled $22.3 billion while ASEAN investment into China was $90 billion, according to the Ministry of Commerce.
“When we look at China’s overseas investments, we are not looking at huge numbers,” says Dr Chunlai Chen of the Crawford School of Economics and Government at the Australian National University in Canberra.
“China’s investments in Australia last year, for example, were less than two percent of all foreign investment into Australia,” he tells China Daily Asia Weekly.
“People need to appreciate that China’s overseas investment has started from a very low base.
“So when you look at percentages, the numbers appear quite big but in reality they are still quite small when compared with other countries such as the US.”
During the 1990s China’s overseas investment averaged about $2 billion a year, but quickly picked up speed when there was a policy shift easing restrictions on Chinese companies investing overseas.
Duncan Freeman of the Brussels Institute of Contemporary China Studies says since the government introduced its “go global” policy over a decade ago most restrictions on overseas investments have been removed.
“The Chinese government has frequently described the go global policy as making use of both domestic and foreign resources and markets,” Freeman writes in a paper, China’s Outward Investments.
“In more concrete terms, for outward investment this means the encouragement of projects that achieve specific goals: Obtaining raw materials that China lacks, stimulating sales of goods by Chinese enterprises, and raising their research and development and technology capacity.”
China’s share of FDI into Australia in 2010 was just 1.7 percent; Japan was 10.4 percent, Britain 11.1 percent and the US 25.4 percent.
“True, much of this is aimed at the resources sector but China is also looking at agricultural investments,” says Chen.