|Jia Qinglin (l), chairman of the Chinese People's Political Consultative Conference (CPPCC) National Committee, holds talks with Polish Senate Speaker Bogdan Borusewicz in Warsaw, Poland, during his official goodwill visit on Nov. 2, 2010. Photo: Xinhua
China's overseas direct investment strategy is an issue of interest in many
regions of the world, given
the Asian giant's position as the world's second biggest economy and its foreign
exchange reserves which amount to US$2.5trn
Chinese vice president Xi
Jinping said last September that in 2009,
domestic investors from China made direct investments in 111 countries and
regions, and China's outward direct investment in non-financial sectors totaled
US$17.8bn, which represented a 44% year-on-year increase.
China’s outbound non-financial direct
investment was just $143m in 2002.
“We should hasten the
implementation of our ‘going out’
strategy and combine the utilisation of
foreign exchange reserves with the
‘going out’ of our enterprises,” Wen
Jiabao, China's premier told Chinese
diplomats in July 2010.
Chen Jian, vice minister of the Ministry of
Commerce said on Monday this week that the
localization of Chinese business has facilitated talent training and industrial
upgrades in host countries by bringing capital, technology, jobs and tax revenue
there. Statistics show that Chinese enterprises operating in overseas markets
paid $10.6bn and employed 438,000 local staff in their host countries.
Chen said from 2000, Chinese enterprises have
built about 70m square meters of houses, some 60,000 kilometers of road, and
some 3.5m installed kilowatts of power stations in Africa. They have built a
good reputation for their high quality. In a Richter 6.7 strong earthquake in
Algeria in 2003, none of the houses built by China State Construction Eng. Corp.
(China Construction) for local residents collapsed. They are praised as
He said China’s financial support has provided important opportunities for local
economic development. The Chinese government has announced an $11.2bn credit
commitment to African countries since the Forum on China-Africa Cooperation was
established in 2000. An array of projects have been funded by that capital, such
as a residence project in Equatorial Guinea, power plants in the Democratic
Republic of Congo and Gabon, and highways in Ethiopia, etc.
The minister said by the end of 2009, 12,000
Chinese investors had set up 13,000 overseas enterprises in 177 countries and
regions around the world with assets exceeding $1trn China’s outbound Foreign Direct Investment (FDI)
totaled $246bn in terms of net value, ranking the 15th in the world and the
third among developing economies, following China’s Hong Kong SAR and Russia.
While China's overseas investments have a strategic purpose to secure natural
resources and related investments in for example overseas ports, Chinese companies are planning
to take a more cautious approach to foreign acquisitions, avoiding outright
buyouts and seeking more partnerships and alliances, according to a report by
the Economist Intelligence Unit
published last April.
The report said Chinese
companies made a record number of cross-border acquisitions in 2009 - - some 298
in total. Much of this investment has been welcomed by cash-strapped Western
companies that would be hard-pressed to survive without it. But China’s buying
spree has raised a number of concerns, particularly where it has involved
state-owned enterprises (SOEs). And like their Western counterparts before them,
Chinese companies are discovering just how difficult it can be to get mergers
and acquisitions (M&A) right, especially when they are cross-border deals. These
factors have encouraged companies to lower their ambitions.
The most high profile company investment in Europe was Geely Holding Group's acquisition of
Ford Motor Co.'s Volvo unit for $1.5bn, which
was completed in August 2010. The deal gives the small
Chinese carmaker a global brand and huge
Industry analysts said
the 13-year-old Geely,
barely known abroad, would face a struggle in
integrating the two corporate cultures and
turning around Volvo Cars, a longtime
money-loser in a country with strong trade
In the first half of 2010, China was the EU27's second most important trading
partner after the US, accounting for 8.5% of EU27 exports and 17.8% of EU27
EU27 FDI into China was €5.3bn in 2009, compared
with €6.7bn in 2006, €6.6bn in 2007 and €4.7bn in 2008, while Chinese direct
investment into the EU27 stood at €0.3bn in 2009, compared with 2.2bn in 2006,
0.8bn in 2007 and a disinvestment of €0.1bn in 2008.
In November 2008, Chinese President Hu Jintao promised to expand maritime trade with Greece after
finalising a $1bn container-port concession deal . Under the agreement, China's Cosco Pacific received a 35-year concession
to manage two container terminals at Greece's main port of Piraeus.
Greek prime minister Costas Karamanlis said Greece would become a key transit
point for Chinese goods bound for south-east Europe and the eastern
Dock workers staged a 24-hour strike to protest against the agreement and
several hundred dock workers marched on the then prime minister's official
That was a long time ago - - 2 years!
“I have made clear that China
supports a stable euro,” Chinese
Premier Wen Jiabao said last month
during a visit to Greece at the start of
a one-week European tour. “We will
not reduce the holdings of European
bonds in our foreign exchange
portfolio,” he added.
Wen offered to buy Greek government
bonds when Athens resumes issuing. He
said China needs to diversify its
foreign currency holdings and has bought
$625m worth of Spanish government bonds.
Wen also referred to a $4.5bn credit
line that troubled Greek shipbuilders
could have access to for purchasing
Later in Rome, the Colosseum was illuminated in communist red and Wen and
Silvio Berlusconi, the Italian prime minister announced a plan to more than
double bilateral trade to $100bn by 2015, with the focus on boosting investment.
Carmaker Fiat plans to close its plant in Sicily next year and the move has
prompted expressions of interest from China.
Among 10 business deals signed during Wen's
Italian visit, two involved investments in
Italy’s broadband sector, with China's
telecom firm Huawei (known for its modem
sticks) expanding its
co-operation with Vodafone Italia and ZTE
linking up with Tiscali.
The New York Times
Tuesday that "struggling Ireland is also looking for a piece
of the action, and moves are afoot to create an
'investment gateway to Europe' for China in
the town of Athlone, which hopes for the
creation of thousands of jobs. Prime Minister
Brian Cowen of Ireland said in June that
China had vowed to be 'as helpful as they can to
a friend like Ireland in the difficult times
that we have.'”
It's not clear if this project is more than puff, given the proposed location
in the centre of the country.
Ireland has had a number of Japanese and South Korean FDI investments in
the past few decades. However, most of them ultimately ended as failures.
The NYT also says China won a contract
last year over European companies to build
a highway in Poland using a Chinese business
and workers - - with European subsidies - -
prompting Chancellor Angela Merkel of Germany to
call for reciprocity.
The US is wary about Chinese direct investment and it prohibits sales of some
high tech products because they could be used by the Chinese military.
Huawei announced Monday it will invest $67
million to help create 164 new research jobs in Ottawa, Canada over five years.
Executives of the company, which faces intense opposition to expanding in the
US because of concerns about possible ties to the Chinese military, told the
Financial Times it would allow outside companies to check its network equipment
when competing for contracts.
China is now Brazil's top trading partner, surpassing the United States for
the first time last year. Brazilian imports from China jumped 12-fold from 2000
to 2009, and exports went up 18 times. China consumed almost 14% of Brazil's
exports in 2009 -- and sent back almost 13% of Brazilian imports.
China is a big
importer of raw soybeans from Brazil and according to Reuters,
China has devastated Brazilian
shoemakers and its factory workers, building an Asian industry that is now the
world's top shoe exporter, shipping out around 8bn pairs last year alone.
SEE also: China holds only 9% of US sovereign debt contrary to
misperceptions; China's export surge is also subject to misinterpretation