China Ramps up International Investment
Transnational investments are a growing engine of globalization and have transformed world economic landscapes. They are also a crucial element of international exchanges and cooperation. The economic interdependence fostered by globalization has turned many old foes into mutually reliant trading partners.
China owes much of its swift and strong economic growth to influxes of foreign capital. Formerly a net recipient of cross-border investments, China has now taken the opposite role. Chinese capital is pouring outwards, propping up transnational corporations, transferring technologies and in the process boosting the welfare and development of the host countries. Although international investment has declined since the financial crisis, China's increasing foreign investments have polarized world attention.
By staff reporters LI WUZHOU & DANG XIAOFEI
THE steady growth of China's outbound investment since the turn of the new millennium has generated mixed responses to Chinese capital. A main point of media focus, it has been both welcomed and called into question.
To put China's outbound investment in perspective, China Today held an exclusive interview with He Zhenwei, executive deputy secretary-general of China Overseas Development Association.
He holds that the "going global" strategy operates in the context of China's main economic policy during its 35 years of reform and opening-up of absorbing foreign investment. In his view, that China's empowered enterprises now invest abroad and so hone their international competitiveness is an inevitable feature of the country's drive to join the globalization trend. He moreover believes that, having greatly benefited from foreign investment, it is now time for China to venture abroad and bring benefits to humankind in general as well as improve the wellbeing of its own people.
Misconceptions
Reports in certain foreign media contend that China's outbound investment gives preference to resources-related projects, the country's main aim being to exploit the resources of others. He Zhenwei holds that such sensationalized media hype, as sparked off by large enterprises like China Petrochemical Corporation (Sinopec Group) and China National Offshore Oil Corporation's acquisition of resources-related projects, misleads the public into believing that the sole aim of China's big state-owned enterprises is to lay claim to overseas resources.
China's outbound investment took off relatively late, standing at US $2.7 billion in 2002, rising to US $2.85 billion in 2003, and climbing to US $26.5 billion in 2007. It was not until 2008 that outbound investment exceeded US $30 billion, having skyrocketed that year to a volume of more than US $55.9 million.
The steep increase in 2008 undoubtedly related to the world financial crisis. Prior to 2008 the high thresholds that Western countries set for foreign investment left few such opportunities for China's enterprises. The world financial crisis of 2008, however, interrupted the financial supply chains of many countries, leading them to make more fields accessible to foreign investment. Chinese enterprises like Zhejiang Geely Holding Group and the Sany Group benefited from these open policies, the former thus acquiring Volvo and the latter purchasing Germany-based Putzmeister. But the manufacturing industry is the main focus of China's new outbound investment.
"I believe China's overseas investment has boosted the economic recovery of some countries and propelled their industrial structural adjustment," He said. Taking Russia as an example, He elucidated this point: Since Russia is in the throes of economic transition, a vast amount of capital has flowed into high-profit energy fields. Russia consequently welcomes the entry of China's capital into its processing and manufacturing industry, because it creates jobs and impels economic restructuring. The leapfrog development of China's overseas investment in 2008, therefore, demonstrates that the global financial crisis gave China access to certain developed countries' manufacturing industries rather than creating opportunities for the purchase of overseas resources. China itself experienced a declining demand for resources during the crisis.
He Zhenwei further expounded on the distribution of China's overseas investment, using the U.S. as an example. The U.S. economy had long been structurally dominated by finance and virtual economy. America has since acknowledged that it is the real economy that is now crucial to its economic recovery. This is where China's investment has been mainly directed. It has significantly promoted the U.S.'s economic restructuring. U.S. Ambassador to China Gary Locke said in his speech at the 5th China Overseas Investment Fair last December that China's total investment in the U.S. over the previous 21 months had reached US $18.5 billion – equal to the total sum over the preceding 11 years. This statistic confirms the remarkable growth of China's investment in the U.S. But obtaining approval for investment in its resources sector is nonetheless still difficult.
"China's overseas investment is diversified, covering almost all economic sectors, mainly concentrated on infrastructure and manufacturing. Business service heads the investment sector, and the mineral resources sector ranks fourth," He said. Only a fraction of the 16,000 Chinese enterprises that have gone global are resource enterprises.
