China's 'go abroad' policy produces effects

14:45, July 18, 2011      

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The number of Chinese enterprises with investments abroad and the total amount of their overseas investments have both considerably increased over recent years. Chinese enterprises have become a major force in the international investment market.

However, Chinese enterprises still need to improve themselves during the process of going abroad. They must make long-term plans and internationalized strategies, respect local religious customs, take up social responsibility and adopt a win-win investment philosophy.

The government needs to improve the support, service and risk-control systems for its "go abroad" policy. Furthermore, it must properly regulate state-owned enterprises, relax control on private enterprises and reduce political risks of overseas investments through bilateral government consultations.

Rapid expansion in scale of diversified investments

The scale of China's overseas investments reached 50 billion U.S. dollars to 60 billion U.S. dollars in 2010. Dong Songgen, vice chairman of the China Council for the Promotion of International Trade, said that Chinese enterprises' cumulative outbound direct investments stood at 260 billion U.S. dollars at the end of 2010. The pace of Chinese enterprises' "going abroad" will be further accelerated during the 12th Five-Year Plan period. According to a recent report released by the U.S.-based Asia Society, China's gross overseas investments are expected to reach 2 trillion U.S. dollars by 2020.

In addition to the expanded scale, Chinese enterprises' overseas investments have been more diversified in terms of destination countries and regions, and investment fields and channels. Data shows that Chinese enterprises have established 13,000 enterprises in 177 countries and regions.

Xu Wei, director of the Economic Information Department of the China Council for the Promotion of International Trade, said that Chinese enterprises are increasingly keen on investing abroad. A latest report released by the council said that Asia, Europe and North America are the primary destinations of the investments by Chinese enterprises, and Africa has become a new hot investment destination of Chinese enterprises.

In terms of countries and regions, the United States is still the largest investment destination for Chinese enterprises, with 28 percent of Chinese enterprises surveyed planning to invest in the United States. Furthermore, E.U. countries, such as France, Germany and Italy, are also popular with Chinese enterprises. Vietnam, India and Russia are the developing countries that are main investment destinations of Chinese enterprises.

Xu said that the foreign investment of China's enterprises cover various kinds of industries. Of them, the industry in which China invests in most heavily is the manufacturing industry, and the proportion of China's foreign investment in this industry to total foreign investment is 78 percent in developed countries and 71 percent in developing countries.

The foreign direct investment mode that China's enterprises have adopted most is Green Field Investment, which accounts for 40 percent. In addition, more than 30 percent of the enterprises have adopted the mode of founding a joint venture. The number of China's enterprises that invest in foreign countries through mergers and acquisitions is also growing, and their investment accounts for 22 percent and 15 percent of the total in developed countries and in developing countries, respectively.

State-owned firms take lead; Private enterprises exploring

Ma Yu said that the main part of China's foreign investment is still done by state-owned enterprises currently. According to statistics, the foreign investment from state-owned assets plays an absolutely dominant role.

As of the end of 2007, the foreign investment of state-owned enterprises accounted for 71 percent of the total. The investments in important industries and realms such as resources and finance and the large-scale investments are mainly carried out by state-owned enterprise. In addition, the foreign investment of limited liability companies, joint stock limited companies and other enterprises accounts for 20 percent, 5 percent and 2 percent.

Ma believes that private enterprises are actually competitive and are quite promising in terms of future development. In the long run, private enterprises should become the main part of overseas direct investment, he said. In fact, as the foreign direct investment of private enterprises is strengthening, a lot of overseas enterprises that enjoy quite good reputations in local places and have good economic benefits have appeared, such as the Wanxiang America Corporation and Sunshine European Corporation.
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