Breaking down China's overseas investment, Part I: The makings of a global phenomenon

Riding the upward wave, China's recent flurry of outbound investment signals a new major investor on the global map

China's ODI has been on an upward trend. (Photo/China Daily)

While China has written a splendid chapter on attracting foreign direct investment (FDI) over the past decade, there have also been many stories about its outbound direct investment (ODI).

Instead of just being a recipient of foreign investment, China's State-owned enterprises (SOEs) and private companies have become major "foreign investors" in their own right.

An Upward Trend

According to official statistics, by the end of 2011, China's ODI had increased for 10 straight years, with an average annual increase of nearly 45 percent from 2002 to 2011. Its accumulative ODI had surpassed $400 billion by the end of last year, ranking 13th in the world.

China's ODI has been increasing at a rapid pace, especially in recent years. From 2006 to 2010, China enjoyed a double-digit average annual growth. It overtook Japan and the United Kingdom in 2010 to become the fifth-largest global investor.

During the first 10 months of this year, China's ODI in non-financial sectors surged 25.8 percent year on year to $58.2 billion, figures released by China's Ministry of Commerce (MOC) in November showed.

According to a poll conducted by the China Council for the Promotion of International Trade in April, most of the companies surveyed said their overseas investments were made during the past five years, and only 3 percent said their overseas operations were established 10 years ago.

"The fast growth of China's ODI shows the improved competitiveness of Chinese companies," Shi Mingshen, one of China's most influential business commentators, said to this journalist. "The external environment and China's ever-increasing foreign reserves also enable the country to invest overseas."

"With foreign reserves of $3 trillion in hand, we will not sit back and watch the assets depreciate with the third round of quantitative easing. We must make our contribution to global prosperity," Commerce Minister Chen Deming said at a financial forum last month in Beijing.

China's ODI this year will surpass that of last year to hit $70 billion and is set to increase in 2013, Chen said.
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