China’s outbound investment (ODI) is surging from already-record levels.
In 2023, China’s ODI rose by 8.7 percent to reach US$177.3 billion, making it the third-largest source of ODI globally. In the first eight months of 2024, investment from China into other countries rose by 12.5 percent year-on-year to RMB 789.5 billion (US$110.9 billion in dollar terms).
The investment landscape has shifted towards emerging markets, particularly in Southeast Asia and Africa. China’s booming clean energy sector is increasingly looking to set up operations overseas.
China’s role as a global investor continues to expand.
According to data from China’s Ministry of Commerce (MOFCOM) and the State Administration of Foreign Exchange (SAFE), in the first eight months of 2024, China’s total ODI reached RMB 789.45 billion, a year-on-year increase of 12.5 percent in yuan terms (US$110.99 billion in dollar terms, up 10.6 percent). Chinese investors made non-financial direct investments in 6,762 overseas enterprises across 151 countries and regions, with a total investment of RMB 669.24 billion, up 14.3percent (US$94.09 billion in dollar terms, up 12.4 percent).
This jump followed the already high ODI record in 2023. In 2023, China’s ODI flow reached US$177.29 billion, an increase of 8.7 percent from the previous year, accounting for 11.4 percent of the global total. China has ranked among the top three globally for 12 consecutive years (following the United States and Japan) and has held over a 10 percent share of the global total for eight consecutive years. By the end of 2023, China’s ODI stock stood at US$2.96 trillion, maintaining its position among the top three globally for seven consecutive years.
Meanwhile, China’s ODI landscape, as detailed in the recently released 2023 Statistical Bulletin of China’s Outward Foreign Direct Investment, is experiencing a notable shift. While traditional destinations like the United States, the European Union, and Australia saw reduced inflows, China’s focus has increasingly turned towards emerging markets, particularly Southeast Asia and Africa, where investments surged significantly.
The investment sectors remain diverse—in 2023, China’s ODI spanned 18 sectors of the national economy. Investments in leasing and business services, wholesale and retail, manufacturing, and finance accounted for nearly 80 percent of the total for the year. Investments in the construction industry and the information transmission/software and information technology services sectors grew rapidly, with growth rates of 97.2 percent and 34.9 percent, respectively.
In this article, we delve into China’s 2023 ODI data and navigate the major trends and dynamics in China’s ODI landscape.
Distribution of China’s ODI by country/region
By the end of 2023, China’s ODI spanned 189 countries and regions, covering 80.8 percent of the globe. The distribution highlights key areas of focus across different regions.
In Asia, China had an investment stock of US$2,014.84 billion, making up 68.2percent of its global total. The majority of this was concentrated in Hong Kong (87 percent of China’s investments in Asia), with significant investments also in Singapore, Indonesia, Macao, Vietnam, Malaysia, Thailand, and Laos.
Latin America received US$600.8 billion (20.3 percent of the total), with most of this flowing to the British Virgin Islands and Cayman Islands, which together accounted for 96.7 percent of China’s regional investments. Other key countries included Brazil, Mexico, Peru, Chile, the Bahamas, Jamaica, Panama, and Argentina.
In Europe, China invested US$147.68 billion, or 5 percent of its total ODI. Investments were primarily directed to the Netherlands, the United Kingdom, Germany, Sweden, Luxembourg, and Russia, along with France, Switzerland, Italy, Spain, and several Central and Eastern European countries.
In North America, China’s investments amounted to US$110.11 billion (3.7 percent), largely focused on the United States and Canada.
Africa attracted US$42.11 billion (1.4 percent), with top investment destinations including South Africa, the Democratic Republic of Congo, Nigeria, Ethiopia, and Angola.
In Oceania, China’s investments reached US$39.85 billion (1.4 percent), with Australia and New Zealand being the main recipients, along with smaller economies like Papua New Guinea and Fiji.
Notably, nearly 90 percent of China’s ODI was concentrated in developing economies, totaling US$2,645.69 billion by 2023. Of this, Hong Kong accounted for US$1,752.52 billion (66.2 percent), and ASEAN nations for US$175.62 billion (6.6 percent).
In contrast, China’s investments in developed economies amounted to US$309.71 billion (10.5 percent). The European Union (US$102.42 billion) and the United States (US$83.69 billion) were the largest recipients, followed by Australia, the United Kingdom, and Canada.
Overall, the top 20 destinations for China’s ODI, including Hong Kong, the British Virgin Islands, the Cayman Islands, Singapore, and the United States, accounted for 94 percent of the total, or US$2,779.91 billion.
China’s ODI in ASEAN
In 2023, China’s direct investment in the ASEAN region reached approximately US$25.12 billion, marking a significant increase of 34.7 percent from the previous year. This investment accounted for 14.2 percent of the total investment flows for the year and represented 17.7 percent of China’s overall investment in Asia.
The distribution of investment flows across different industries indicates that manufacturing was the primary sector, attracting US$9.15 billion, which represents a yearly growth of 11.4 percent and constitutes 36.4 percent of total investments. The primary destinations for these investments included:
Vietnam;
Indonesia;
Thailand; and
Singapore.
The wholesale and retail sector followed with US$4.81 billion, a rise of 14.6 percent, accounting for 19.2 percent of total flows, mainly directed towards Singapore. Agriculture, forestry, animal husbandry, and fishing saw a remarkable increase, totaling US$1.14 billion and reflecting a staggering growth rate of 1,387.3 percent, primarily benefiting Singapore and Laos.
In terms of financial services, investments decreased by 37.7 percent to US$580 million, representing 2.3 percent of total investments, while residential services and repairs experienced a significant surge of 185.5 percent, reaching US$570 million. The mining sector, however, saw a sharp decline of 73percent, totaling US$490 million.
From a geographical perspective, Singapore emerged as the leading destination for Chinese investments, receiving US$13.1 billion in new ODI in 2023 and accounting for 52.1 percent of total ASEAN investment flows. This reflects a robust growth rate of 57.9 percent, with the majority of funds directed toward the wholesale and retail sector, leasing and business services, and manufacturing. Indonesia ranked second with US$3.13 billion, a decrease of 31.1 percent, while Vietnam followed closely in third place, attracting US$2.59 billion with a growth of 52.3 percent.
China’s ODI in the EU
Total investment flow from China to the EU reached US$64.8 billion, a 6.1 percent decline from the previous year, representing 3.7 percent of China’s total foreign investment. As of the end of 2023, China had established over 2,800 direct investment enterprises across all 27 EU member states, employing over 270,000 local employees.
Top destination countries included:
Luxembourg was the leading recipient of Chinese investment, with a flow of US$23.3 billion, although this represented a 28.3 percent decrease from the previous year (36 percent of total EU investment).
Netherlands followed with US$9 billion, a recovery from a negative flow in 2022 (13.8 percent of total).
Sweden ranked third with US$7.4 billion, a significant drop of 59.8 percent (11.5 percent of total).
In terms of sector distribution:
The financial sector attracted the most investment, totaling US$25.2 billion, marking a 27.7 percent increase, concentrated mainly in Luxembourg, Ireland, and Italy.
The manufacturing sector received US$18.7 billion, a 51.7 percent decline, with significant investments in Sweden, Germany, and Hungary.
The wholesale and retail sector saw investments of US$17.3 billion, a dramatic 167.7 percent increase, primarily directed towards the Netherlands and Sweden.
Overall, China’s investment in the EU demonstrated a notable shift in both flow and sector focus in 2023, highlighting a significant decline in certain sectors like manufacturing while financial services saw robust growth. Despite the decrease in total investment flow, China’s continued presence in the EU reflects its strategic interest in various industries, particularly finance and retail.
China’s ODI in the US
In 2023, China’s ODI flow to the United States amounted to US$6.91 billion, representing a decline of 5.2 percent from the previous year. This investment accounted for 3.9 percent of China’s total ODI flow.
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Chinese investments in the US spanned across 18 industries. The financial sector attracted US$2.25 billion, despite a 31.6 percent decrease, making up 32.5 percent of the total investment flow. The manufacturing sector followed with an investment of US$1.23 billion, down 20.2 percent, accounting for 17.8 percent of the total. Notably, the wholesale and retail sector experienced a significant increase of 109 percent, reaching 1.23 billion US dollars.
Other growing sectors included scientific research and technical services (US$820 million, up 26.6 percent) and mining (US$420 million, up 16.5 percent).
China’s ODI in Australia
In 2023, China’s ODI flow to Australia was US$5.5 billion, reflecting a significant decrease of 80.4 percent from the previous year, constituting only 0.3 percent of the total investment flow. Despite this decline, over 90 percent of China’s investment in Oceania was directed toward Australia.
The investment distribution across industries in Australia was predominantly in the financial sector, attracting US$4.4 billion (81.4 percent of total investment), while the manufacturing sector received US$1.5 billion (27.2 percent).
In terms of investment stock, the mining industry had the largest share at US$15.45 billion, constituting 44.4 percent of total investments. The leasing and business services sector followed with US$6.67 billion (19.2 percent), and the financial sector accounted for US$4.05 billion (11.7 percent). The real estate sector attracted US$2.48 billion (7.1 percent), with manufacturing receiving US$1.7 billion (4.9 percent).
Distribution of China’s ODI by industry type
By the end of 2023, China’s ODI expanded across every sector of the national economy. However, the majority of investments were concentrated in a few key industries. The top seven sectors, each holding over US$100 billion in investment, highlight where China has placed its greatest financial focus:
Leasing and business services led the way with US$1,179.1 billion, representing nearly 40 percent of China’s total ODI. This sector is primarily driven by investment holding, with funds flowing into regions like Hong Kong, the British Virgin Islands, the Cayman Islands, Singapore, the United States, Australia, and Luxembourg.
Wholesale and retail came in second, with US$421.4 billion (14.3 percent of total ODI). This reflects China’s growing involvement in global supply chains and trade networks.
The financial industry saw investments totaling US$323.8 billion (11 percent), emphasizing China’s expanding footprint in international financial markets.
Manufacturing, long a cornerstone of China’s economic power, attracted US$283.4 billion (9.6 percent). Within this sector, the automotive industry stood out, receiving US$72.06 billion in investments. Other notable areas include electronics, pharmaceuticals, and specialized equipment manufacturing
The mining industry accounted for US$193.5 billion (6.5 percent), with a focus on extracting essential resources such as oil, gas, and minerals.
Information technology and software services attracted US$133.1 billion (4.5 percent), becoming an increasingly significant area, particularly for individual Chinese investors looking to tap into the tech boom.
Lastly, transportation, warehousing, and postal services received US$104.2 billion (3.5 percent), highlighting China’s role in global logistics and infrastructure.
These seven industries together represented 89.3 percent of China’s total ODI at the close of 2023, showcasing the country’s strategic focus on services, manufacturing, and resource acquisition as it continues to expand its influence on the global stage.
Profile of Chinese investors involved in ODI
China’s outward direct investors (also referred to as “Chinese investors”) encompassed nearly 30,741 registered entities. These investors represented a diverse mix of private and public ownership structures, contributing significantly to China’s global investment footprint. Specifically:
Private enterprises were the most dominant group, accounting for 34.7 percent of all Chinese investing entities, reflecting the vital role of private capital in China’s outward investment strategy.
Limited liability companies followed closely, making up 28.5 percent of the total investor pool.
Shareholding companies represented 13.2 percent, while foreign-invested enterprises accounted for 5.6 percent.
State-owned enterprises (SOEs), although highly influential in strategic sectors, made up only 5.4 percent of the total.
Investments from Hong Kong, Macao, and Taiwan-backed entities contributed 4 percent.
Besides, smaller contributors included individual businesses (2.1 percent), cooperative enterprises (0.9 percent), collective enterprises (0.3 percent), and joint ventures (0.1 percent).
Most of China’s outward investors came from its economically advanced regions, with Guangdong leading the way with over 7,400 investors (24.1 percent of the total). Other key provinces included:
Shanghai with more than 3,700 investors (12.2 percent).
Zhejiang, home to over 3,500 investors (11.6 percent).
Beijing, Jiangsu, and Shandong also played significant roles, contributing to the overall concentration of outward investors.
Key takeaways and future prospects
As we reflect on the evolving landscape of China’s ODI, it is evident that the country’s ambitions on the global stage are not merely a reflection of its economic prowess but also of a strategic pivot towards emerging markets and critical sectors. The surge in ODI to US$177.3 billion in 2023, with a notable 12.5 percent increase in the first eight months of 2024, underscores China’s determination to solidify its position as a leading global investor.
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This momentum is particularly pronounced in Southeast Asia and Africa, where investments are diversifying across sectors, driven by the burgeoning clean energy market and traditional sectors like manufacturing, wholesale, and retail. The shift away from established markets, such as the United States and the European Union, indicates a calculated approach to leverage growth opportunities in developing economies.
Nearly 90 percent of China’s ODI is now directed toward these regions, signifying a commitment to fostering economic partnerships that align with its broader geopolitical goals.
The data from MOFCOM and SAFE reveals that Chinese investors have engaged with 6,762 overseas enterprises across 151 countries, emphasizing the broadening scope of Chinese investment activities. While traditional sectors like finance and manufacturing remain significant, the rapid growth in construction and information technology reflects an adaptive strategy that resonates with the demands of a changing global economy.
Moreover, the concentration of investment in key destinations—notably Hong Kong, the British Virgin Islands, and ASEAN nations—reveals the strategic pathways through which China is channeling its capital. The ASEAN region, for instance, attracted US$25.12 billion in 2023, showcasing China’s focus on deepening economic ties within Asia.
A notable aspect of this investment surge is China’s decisive push into clean energy technology. Chinese companies have committed more than US$100 billion in ODI since 2023, marking a shift in how the country directs its green funds. As the Wall Street Journal highlights, this “green tsunami” reflects China’s growing dominance in clean technology manufacturing and supply chains, which now encompass over 80 percent of global solar manufacturing equipment.
Chinese leadership in clean energy is a double-edged sword. On one hand, it positions China as a crucial player in the global energy transition, pushing other nations to enhance their own cleantech capacities. However, this leadership also incites significant competition, particularly from Western nations that are increasingly prioritizing their own clean energy initiatives. As these countries ramp up investments in domestic green technologies, they aim to reduce reliance on Chinese imports and secure their own positions in the emerging global energy economy. This competitive pressure may lead to a race for technological advancements and market share, further complicating the landscape for Chinese firms seeking to establish manufacturing bases abroad.
All in all, China’s ODI trends highlight a robust commitment to expanding its global influence through strategic partnerships and targeted investments. As these dynamics evolve, stakeholders must navigate the complexities of this landscape, considering the implications of China’s growing presence in emerging markets and its commitment to sectors that align with sustainable development goals.
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Dezan Shira & Associates assists foreign investors into China and has done so since 1992 through offices in Beijing, Tianjin, Dalian, Qingdao, Shanghai, Hangzhou, Ningbo, Suzhou, Guangzhou, Dongguan, Haikou, Zhongshan, Shenzhen, and Hong Kong. We also have offices in Vietnam, Indonesia, Singapore, United States, Germany, Italy, India, and Dubai (UAE) and partner firms assisting foreign investors in The Philippines, Malaysia, Thailand, Bangladesh, and Australia. For assistance in China, please contact the firm at china@dezshira.com or visit our website at www.dezshira.com.
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Publish date : 2024-10-16 00:22:00
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