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China's overseas investment focusing on manufacturing
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17:10, April 24, 2009

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A recent survey conducted by China Council for the Promotion of International Trade (CCPIT) shows that the manufacturing sector is the first choice for Chinese enterprises' outflow foreign investment, but the overall investment scale is relatively small.

Based on the analysis of over 1,100 businesses, the survey, released on Wednesday, also shows trade and exploitation of natural resources, transportation and processing make up Chinese companies' other main overseas investment areas.

Among 315 surveyed companies which had carried out foreign investment, more than 50 percent of ICT companies have had foreign investment, followed by construction enterprises at over 40 percent, natural resource development companies and agricultural enterprises at more than 30 percent.

Meanwhile, of 315 companies which had overseas investment, about two-thirds of them say the existing investment size is less than $5 million, some 20 percent exceed $10 million, and only 6 percent reache $100 million.

Furthermore, Asia and Southeast Asia, are Chinese enterprises first places to target, and more than 60 percent of them had conducted investment there. These places are followed by North America, Western Europe and Africa.

Expanding market is the main purpose of foreign investment by Chinese enterprises, and the next is access to advanced technology and management experience. The others include lowering cost, making use of local natural resource, accessing international famous brands and avoiding trade barriers. Chinese enterprises have regarded overseas investment as a long-term strategy.

Setting up offices is most popular with Chinese businesses conducting overseas investment; the next is establishing joint-stock companies with local businesses, and then setting up their own retail shops and marketing networks, and a new wholly-owned company. M&A has not yet become a mainstream of foreign investment. There will be no major changes in this situation in next 3 to 5 years.

The financing channel is growing diversified, and self-funded capital has become an important source of overseas investment of Chinese businesses. Some 45 percent of companies choose state-owned banks to finance them, 10 percent went to non stated-owned banks, while 15 percent choose to issue stocks. Only a small number of companies choose to issue bonds.

China established 445 companies in first three months of this year, an increase of 6.8 percent year-on-year. And overseas investment by non-financial enterprises totaled $3.7 billion. China's outflow foreign investment in 2008 amounted $52.15 billion, nearly doubled than that of 2007.
By People's Daily Online

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