China's offshore investment will exceed US$1 trillion

Sep 21, 2015

China’s outbound direct investment (ODI) is expected to exceed US$1 trillion for the first time in 2015 as slowing economic growth and rising internationalisation of Chinese business leads to more local companies investing abroad.

Total direct investment offshore rose to just under US$883 billion in 2014, Zhang Xiangchen, the Ministry of Commerce’s deputy China international trade representative, said on Thursday.

The ministry reported on Wednesday that non-financial ODI rose 18.2 per cent to 473.4 billion yuan (US$77 billion) for the first eight months of the year.

On Thursday it also revised up its 2014 offshore non-financial direct investment tally to US$107.2 billion from the US$102.9 billion reported previously, taking total outward investment for the year to $123.12 billion.

“Our outbound investment has maintained a double-digit growth rate, and this trend will be sustained in future,” Zhang told a media briefing.

China’s slowing economy and market volatility was driving domestic firms to acquire foreign brands and technology, as well as diversifying, said , research director at the US analysts, Rhodium Group.

Beijing has rolled out policies to support the global efforts of Chinese companies, offering financial incentives and removing administrative controls on offshore deals.

Chinese companies have already announced or completed 390 deals worth US$77 billion in the year to the end of September 2016, according to Thomson Reuters data – a doubling of the total amount of money involved in deals over the same period last year.

So far this year Chinese firms have already spent more on global mergers and acquisitions than the US$70.4 billion spent over the whole of 2008 – formerly the biggest year to date for offshore mergers.

Industrial deals were the biggest transactions, led by China National Chemical Corp’s buyout of the Italian tyre maker, Pirelli, for US$8.88 billion, which included Pirelli’s debt.

Many of this year’s big deals were done by Chinese firms buying financial services businesses, including HNA Group’s subsidiary, Bohai Leasing Co, which paid US$2.56 billion for the aviation leasing firm, Avolon Holdings.

Zhang said by the end of 2014, 18,500 Chinese domestic investors had established nearly 30,000 enterprises abroad, with about 77 per cent showing profits in 2014.

“State-owned firms and private companies are looking to buy overseas financial institutions that are yielding strong cash-flow and providing an international presence and market share,” Eugene Qian, head of China business at UBS.

Source: South China Morning Post