Statistics issued by China’s Ministry of Commerce on July 17 show that from January to June 2013, Chinese investors had directly invested in 2,912 overseas companies in 144 countries and regions, and total direct investment in non-financial sectors reached $45.6 billion, up by 29 percent year on year. China’s investment in North America, Europe, Oceania, Latin America and Africa has grown by more than 50 percent, with investment in the United States jumping sharply by 290 percent.

The international community, along with insiders, has praised China’s direct outbound investments. Experts and scholars interviewed by People’s Daily all said that China’s accelerated pace in “going global” is of particular significance against the backdrop of a global economic slump.

Merger and acquisition targeting high-end European and US brands

France’s Le Figaro has stated in the headlines of its economic edition that Chinese companies are speeding up overseas mergers and acquisitions. “China is marching towards the world,” and is targeting the best Western brands and companies in terms of professional knowledge. Europe has become the largest overseas market in which Chinese companies seek mergers and acquisitions. The newspaper reports that Chinese capital is being increasingly accepted by Europeans and will remain attractive over the coming years.

An economic expert from France’s Ministry of Economy and Finance, who is in charge of research and innovation says that as China has already set up an operation model where the state and companies share information, Chinese investors have effective access to information from the international market.

Andre Loesekrug-Pietri, chairman of private equity fund A CAPITAL, says Chinese investors are trying to search for capital appreciation while at the same time entering the international market in a step-by-step and less risky way and winning recognition.

Jean-Paul Larcon, a professor at HEC Paris, stated that Chinese companies’ going out to the world is the direct result of reform and opening up as well as rapid development of local economy and international trade. Chinese companies are still facing many challenges on the way out, and thus need to absorb advanced technologies, to enhance capabilities in international marketing and create global brands. Meanwhile, they need to continue cultivating advantages in competition.

Stojkovic, CEO of Resource Australia Group Pty Ltd. and an expert on finance, says statistics issued by China’s Ministry of Commerce on July 17 is quite exciting in the context of a sluggish global economy.

Garrelt Duin, head of the Economic and Industry Department at Nordrhein-Westfalen, says China’s investments are becoming increasingly important and it’s hoped that more local companies will invest in Germany. Situated in the heart of Europe, the latter is blessed with an excellent environment for business as well as research and development. Chinese companies can find very good partners in Germany. Petra Wassner, head of NRW (Nordrhein-Westfalen) INVEST, says China and Germany can create win-win results.

It is said on the US Forbes website that the Chinese Government is encouraging local companies to explore overseas markets and arrange relevant investment training for employees. Local governments in the U.S. are very eager to attract Chinese investment, with state governors and city mayors going out to seek this themselves.

Michael McDonough, a senior economist at Bloomberg News, says stable growth of China’s outbound investments is within expectation. With its economic development, the country is trying to stabilize resources such as energy and raw materials, while promoting growth by purchasing science and technology companies.

Promoting development of Latin America and Africa

Chinese investment is playing an important role in speeding up the upgrade of basic infrastructure in Latin America. In the past 10 years, thanks to the stably rising price of staple primary products, the economy of countries like Brazil, Venezuela and Peru has achieved relatively rapid growth, further highlighting the inefficiency of electric power, transport and telecommunications development. Chinese companies are investing in the construction of power plants, railways and ports in quite a number of Latin American countries. For example, hydropower plant construction based on such support has greatly helped relieve power pressure in Ecuador.

China’s investments have also contributed to improving Latin America’s economic structure. Primary products like petroleum, copper, iron and grain have long been major exports of these countries. They hope to strengthen manufacturing capability and improve industrial structures. In recent years, Chinese investment, having previously focused solely on petroleum and minerals, is turning towards auto manufacturing, electronic products and food processing.

In the past, Chinese companies sent local staff to overseas branches, but in recent years, due to improving managerial capabilities and increasing knowledge of local laws and regulations, more and more companies employ locals. On one hand, more jobs are created and on the other, living conditions associated with Chinese companies are also improving.

A senior practitioner engaged in Africa-bound investments told People’s Daily, China’s overall investment in Africa is rising, which will help promote the China-Africa relationship. Meanwhile, cooperation is no longer limited to project contracting, but is extending to equity investment. China’s increasing stake in Africa is creating more job opportunities, improving local infrastructure and also bringing advanced technologies as well as concepts.

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Joys and Worries

Ma Yu (Director of Chinese Academy of International Trade and Economic Cooperation): Due to factors like the international financial crisis, global transnational investments have almost hit the bottom. At its peak, annual transnational investment hit $2 trillion or so, but has dropped to $1.5 trillion. In 2013, it is expected to rebound to $1.6 trillion. In this gloomy context, China’s investment in other countries seems extremely outstanding. In 2012, non-financial foreign investment reached $77.22 billion, up by 28.6 percent. During the first six months of 2013, Chinese investment in other countries reached $45.6 billion, up by 29 percent. China is no longer just the biggest foreign investment absorber, but is gradually becoming an important investor in the rest of the world.

With an expanding investment scale, the content and features of China’s outbound investments are changing. In the past, investment used to center on industries like resource development and trade, but is now increasingly focused on high-end manufacturing and modern service. In the past, Chinese investments mainly went to Asian and African countries, while nowadays, it is expanding to developed Western countries, with investment in the U.S. jumping by 290 percent in the first half of this year. Investment in mergers and acquisitions is increasing rapidly and extending across the whole industry chain. Previously, Chinese companies used to only stress the development of resources and trade communication, while they are now valuing the enhancement of corporate competitiveness and the implementation of global strategies, by trying to incorporating technologies, brands, products and channels. Although state-owned enterprises still play a dominant role in outbound investments, private companies are catching up and becoming increasingly active. Examples include Geely’s purchase of Volvo, SANY Group’s purchase of Putzmeister and Shuanghui Group’s purchase of Smithfield.

Meanwhile, we have to notice that, despite its current scale, China’s outbound investment is still at a primary stage, with a low success rate and economic efficiency. While there are some external factors, we should recognize problems within our own systems, mechanisms, concepts and operation. With Chinese outbound investment set to reach $100 billion, the Chinese Government and local enterprises will have to improve investment strategies, create a suitable legal and policy environment, nurture and raise international competitiveness and strengthen managerial capabilities in the market economy.