Chinese Overseas Investment
China’s economic growth since the 1980s has seen a marked increase in its overseas investments, as Chinese companies take advantage of the higher returns available overseas. This investment is taking many forms, including direct investments, as well as refinancing and merger and acquisition activities. Chinese investments are becoming increasingly important with the country’s international presence and influence growing.
In the past twenty years, the combination of the growth in China’s economy and the opening up of its markets to global players has seen a major shift in the nature of Chinese overseas investments. With increasing domestic competition and towering labour costs, Chinese companies are increasingly looking overseas for business opportunities which furnish them with higher returns and greater margins. Chinese investment activities now largely involve direct investment in overseas markets, in the form of joint-ventures, acquisitions and mergers.
Many Chinese companies are now looking to international markets for possibilites such as joint-ventures, refinancing and mergers and acquisitions. Joint-ventures allow foreign and Chinese companies to share the risk of their investments and thus providing Chinese companies with an opportunity to gain a foothold in foreign markets. Refinancing activities allow Chinese companies to take advantage of diverse and cheaper finance sources International markets can offer. Closely linked to this, is the various mergers and acquisitions. Acquisitions of foreign companies greatly enhance the Chinese companies access to technology, resources, and markets.
One of the most lucrative investments of recent years is ventures involving China’s energy resources. Investment in the mining sector, particularly in the Middle East has grown rapidly over the last decade, culminating in the 2017 purchase of oil fields from the United Arab Emirates by China’s National Petroleum Corporation.
China’s investments overseas are becoming increasingly diversified and Chinese companies are increasingly sophisticated and innovative in their investment strategies. China is becoming well known for its philanthropic investment style of broadening markets and sharing the wealth. There is a growing trend towards strategic alliances and partnerships between Chinese and foreign firms, and across a portfolio of investments.
Similarly, outward investment by China into South-East Asia is rapidly growing, driven particularly by real estate and financial services investments. In 2018, Chinese companies invested more than $6.5 billion in South-East Asia, up 52% from 2017. This trend is likely to continue as China’s economy is expected to grow at a faster rate than the rest of the world, leading to more opportunities to invest.
In conclusion, China’s overseas investments are becoming increasingly important as the country’s international presence and influence grow. Chinese companies are increasingly exploring international markets for higher returns and greater margins, using a combination of direct investments, joint ventures, refinancing and mergers and acquisitions. Chinese investments in the Middle East and South-East Asia are proving to be particularly lucrative, and there is a growing trend towards strategic alliances and partnerships with foreign companies. As China’s economy continues to grow, so too will its investments overseas, with new opportunities emerging for Chinese companies as a result.
