China Eyes up the World Market

Echoing the zest of foreign countries for Chinese investors, Chinese companies now have a stronger desire for global operations. The Fifth COIFAIR dedicated space to China’s domestic industries centered on equipment manufacturing, energy, services, and culture, and many flag bearers in these fields showed up at the fair. The four energy giants – China National Petroleum Corporation (CNPC), China National Offshore Oil Corporation (CNOOC), Zhenhua Oil, and Sinochem Group – grabbed much attention from international visitors.

Private companies also had a large presence at the fair. Among them were ENN Group, Xinjiang Guanghui Industry Investment Group, Kerui Group, and Antonoil. Both Kerui from Shandong Province and Antonoil based in Beijing have operations in over 40 countries around the world.

In fact, private and shareholding companies have surged to become the main force of Chinese investment abroad. Meanwhile Chinese capital is diversifying into more industries, moving from conventional rough processing of resources to include infrastructure, high-end manufacturing, agriculture, commerce, logistics, and research and development.

China’s increasing outbound investment has substantial benefits at home, buoying exports of commodities, services and technology, while alleviating resource shortages and accelerating industrial upgrading. What’s more, a legion of Chinese transnational companies with global prestige and competitiveness have taken shape along the way.

Though a remarkable sum in itself, China’s 2012 outward investment of US $87.8 billion is a mere 6.3 percent of the world’s total. And the global share is even smaller – 2.3 percent – when it comes to the country’s cumulative overseas investment, which stood at US $531.9 billion. These figures nevertheless indicate huge growth potential.

Chinese companies have made investments abroad mostly through mergers, acquisitions, and green field investments, which account for 40 to 45 percent of the total worth of all deals. In the past Chinese investors often preferred to purchase an entire foreign company, while now they normally start by buying part shares in it. This also signifies a strategic shift.

Policy Changes

Wang Yang, Political Bureau member of the CPC Central Committee and Vice-Premier, delivered a speech at the Fifth COIFAIR. He is the first Chinese leader to talk about China’s outbound investment publicly since the Third Plenary Session of the 18th CPC Central Committee, and the highest-ranking official to attend the event since its inception in 2009.

Wang said that the government would reform the management mechanism for outbound investment and remove obstacles that impede Chinese firms’ overseas expansion. This reform aims to validate the dominant role of corporate and individual investors in their international ventures, and to simplify the country’s outward investment approval process by introducing a registration-based system. The auditing process will also be streamlined to make it more standardized and concise.

The legal consultation stand at the Second China Overseas Investment Fair