Following the financial crisis that hit Asia in the late 1990s, the Chinese government introduced its 'Going Out' or 'Going Global' strategy. The country had been open to inward FDI for a number of years at this stage, and the time had come to promote Chinese companies globally.
The government aimed to increase investment, promote its Chinese brand of companies and improve the country's free market. The policy became one of the government’s 'four modernisations' and encompassed a range of schemes to assist outward FDI, such as using currency reserves to support foreign investment, offering tax rebates to investors and encouraging Chinese embassies globally to offer more and better financial assistance.
A worldwide web
The result has been a boom in Chinese outward FDI. Between January 2009 and December 2013, greenfield investment monitor fDi Markets recorded a total of $161.03bn in Chinese outward FDI, creating almost 300,000 jobs across the world. During this period, in terms of investment projects, China was the ninth largest source country for FDI, peaking in 2011 with 429 projects. In terms of both capital expenditure and job creation, China was ranked seventh globally.
In the five-year period studied, western Europe proved to be the largest regional recipient of Chinese outward FDI, receiving 569 projects. Germany received the highest number of FDI projects of all countries globally (336 projects), while Düsseldorf, with 81 projects, was the number one destination city. Other German destinations feature in the top 20 cities, including Cologne, Neuss and Bremen. Frankfurt also features, attracting 17 projects in total, which were primarily headquarters and office projects. Many Chinese companies which invested in Germany identified access to the European market as a key driver.
Asia-Pacific was the second-highest regional recipient of Chinese outward FDI. Hong Kong and Singapore were placed second and third in the global top 20 cities list, after Düsseldorf. Hong Kong won 80 projects in total, with financial services and business services topping the list of investments. Singapore attracted 51 projects, with Chinese companies focusing on electronic components and software and IT services, as well as the more common financial and business services sectors.
In terms of Chinese outward capital expenditure, Asia-Pacific was the highest regional recipient. The metals, alternative and renewable energy and coal, oil and natural gas sectors attracted the largest investments, with the metals sector alone accounting for almost one-third of the overall Chinese outward capital investment total for the Asia-Pacific region.
Latin America and the Caribbean was the third highest regional recipient of capital expenditure, totalling $1.83bn. The country receiving the largest amount of capital investment was Brazil, which attracted $1.14bn, or 62.7% of the total investment in the region. Brazil and China form part of the BRICS group of countries, whose political landscape leans towards market integration and diplomatic co-operation. According to a report published by the China-Brazil Business Council in 2013 (Chinese Investments in Brazil from 2007-2012: A Review of Recent Trends): “China overtook the US to become Brazil’s largest trading partner, a position it maintains to date.” The report adds: “More recently, an unprecedented surge in Chinese FDI in Brazil has marked a new phase in Sino-Brazilian economic relations.”
Chinese outward FDI was most heavily focused in the communications sector between 2009 and 2013. The largest Chinese investing company was Huawei Technologies, which provides telecom solutions. During the period, the company invested $500m to expand its research and development (R&D) centre in Bangalore, India. It invested another $300m in an R&D facility in Campinas, Brazil. Globally, the company invested in 85 projects between 2009 and 2013, including a range of projects from customer contact centres, research facilities and training facilities to data centres, manufacturing and logistics facilities and shared service centres and sales offices. Most of the company’s investments during the period have been in western Europe, and the company’s overall trend for investment in the region has been rising, peaking in 2013 with 10 projects in the region.
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