Chinese outward foreign direct investment (FDI) will be markedly lower in 2017, after a record-setting pace in 2016, according to the latest Economic Intelligence Unit (EIU) analysis.<\/p>\n
In 2016, Chinese outward direct investment rose by a remarkable 44% to reach $US 170 billion, according China\u2019s Ministry of Commerce.\u00a0 This was the highest level for outflows ever.\u00a0 As a result, Chinese outward direct investment surpassed inward FDI for the first time in 2016.<\/p>\n
The tide turned notably in 2017, however.\u00a0 The first 10 months of 2017 saw a decline of over 40% in outward direct investment flows. The diminished level of Chinese FDI is directly attributed to the brakes that the Chinese government applied.\u00a0 Chinese government approval processes started to tighten in late 2016.\u00a0 Chinese policy makers became concerned that some flows of Chinese capital abroad were designed to bypass their capital controls.\u00a0 A further concern was about large \u201cirrational\u201d investments unlikely to generate returns.<\/p>\n
As a result, there were no recorded Chinese acquisitions of property or sports and entertainment assets abroad in the first ten months of 2017.\u00a0 On the other hand, the share of outward investment in the commodity and energy sectors rose in 2017.\u00a0 The Chinese government also readily authorized strategic and technological investments.\u00a0 For example, ChemChina\u2019s $US 43 billion acquisition of the Swiss-based agriculture giant, Syngenta, the largest takeover to date, was confirmed in June 2017.<\/p>\n
Among the key recent trends identified by the EIU survey are:<\/p>\n
Looking ahead to 2018, the EIU expects Chinese outward direct investment to rebound, though at the rate of growth that will be much less than 2016\u2019s explosive increase.<\/p>\n
There is continued room for growth as China\u2019s global role expands.\u00a0 China still has a much lower level of investment abroad as a share of it GDP (11%) than the US (29%), Japan (28%) or Germany (57%).\u00a0 The future drivers will be China\u2019s desire to grasp global market share by acquiring technology, brands and resources.\u00a0 Investments related to the Belt and Road Initiative \u2013 especially construction \u2013 will also be favoured by the government.\u00a0 Chinese state-owned enterprises (SOEs) will likely remain the main participants in outward investment, though prominent technology leaders such as Alibaba, Huawei and Tencent will determine whether China grows powerful international brands.<\/p>\n