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Western Europe most favored for Chinese ODI: E&Y

By Wang Xinyuan (Global Times)

09:05, August 09, 2012

Chinese companies are particularly enthusiastic about Western Europe for overseas investment opportunities over the next three years, eyeing its technology and undervalued assets amid the continent's debt crisis, Ernst & Young said Wednesday.

A survey by the company found that about 32 percent of Chinese companies believe the best opportunities will be in Western Europe over the next three years. In the whole of Asia, 29 percent of respondents had the same opinion.

The second most attractive destination is the Middle East and North Africa, according to the survey. North America remains the third most preferred region for investment, with 22 percent of Chinese companies saying there would be opportunities in the area.

Most Chinese companies are eyeing the technology sector and other innovative areas in developed markets, according to the report.

The findings are based on a survey conducted by Ernst & Young among 617 executives of companies from Asian countries and regions including China, Thailand and Singapore in March and April.

"Western Europe is relatively open," and some assets in the region are undervalued as a result of the European debt crisis, which attracts Chinese companies, said Loletta Chow, global leader for China overseas investment network with Ernst & Young, at a press conference in Beijing.

Outbound direct investment (ODI) from the Chinese mainland totaled $73 billion in 2011, over seven times the $10 billion of ODI in 2005, according to the report.

"Energy and mining together account for about 71 percent of all the ODI from 2005 to 2012," said Eleanor Wu, China outbound services leader at Ernst & Young.

The percentage of energy and mining in the ODI fell to 60 percent in the first half of this year, while investment in agriculture and technology gained greater weight by growing to 17 percent from only 2 percent in 2009.

Despite efforts to restructure its economy, China still needs to fuel its economic growth with resources including oil and gas, so energy and mining-related overseas investment will continue to dominate for the next few years, Chen Hewu, a consultant with Beijing-based Adfaith Management Consulting, told the Global Times Wednesday.

The overseas investment by China's private companies will not catch up with giant State-owned enterprises soon, Chen said.

Though Chinese policymakers have been encouraging overseas investment by private enterprises, the firms are still having more difficulties in terms of financing overseas deals compared with large State-owned competitors, he said.

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