China's non-financial outbound direct investment (ODI) has been expanding rapidly this year, a trend that analysts said will continue thanks to the "One Belt, One Road" (B&R) initiative and various free trade agreements (FTAs).
ODI soared 61.8 percent year-on-year to $102.75 billion in the first seven months of 2016, Shen Danyang, spokesman of the Ministry of Commerce (MOFCOM), told a briefing on Wednesday.
ODI is mainly conducted in the form of mergers and acquisitions (M&As), whose value was $54.3 billion during the January-July period, surpassing the full-year record of 2015, said a press release the MOFCOM sent to the Global Times.
Many domestic companies seek investment opportunities overseas to improve their core competitiveness, enhance their technology levels and boost industrial upgrading, Li Junjie, a partner at Zhong Lun Law Firm and deputy director of the Institute of International Acquisition and Investment at Renmin University of China, told the Global Times on Wednesday.
For example, Chinese hydropower giant China Three Gorges Co paid 13.8 billion Brazilian real ($4.33 billion) in January for the rights to operate two hydropower plants in Brazil for 30 years, China Three Gorges Project News reported in January.
Domestic company Recon Group announced plans to buy the British Aston Villa Football Club for 65 million pounds ($83.80 million) in May.
China's ODI into developed countries including the US, Germany and Australia grew fast in the first seven months of this year, Shen said. Investment into the three countries rose 210 percent, 200.6 percent and 74.3 percent year-on-year, respectively, he said.
However, Chinese companies' outbound M&A efforts face increasing challenges.
Australia rejected on August 11 the A$10 billion ($7.7 billion) sale of power transmission system Ausgrid to State-owned power distributor State Grid Corp and Hong Kong-based Cheung Kong Infrastructure Holdings, according to Bloomberg.
Shen said that Australia's decision shows protectionism, which is affecting Chinese companies' investment in the country. "China and Australia are crucial trade and investment partners. The two countries set up a comprehensive strategic partnership in 2014 and an FTA between the two took effect in 2015 … We hope Australia could build a more fair, sound and transparent trade and investment environment for Chinese firms," Shen noted.
Li said, however, that domestic companies will continue to invest overseas.
Liu Jianying, an associate research fellow at the Chinese Academy of International Trade and Economic Cooperation, agreed, citing momentum from the B&R initiative and various FTAs.
Since the proposal of the B&R initiative in 2013, China has invested $51.1 billion into countries and regions along the routes, accounting for 12 percent of the nation's ODI since that time.
China and Sri Lanka held the third round of FTA negotiations in the South Asian country's capital Colombo from August 2-4, during which subjects including investment, trade and laws were discussed, Shen said, noting the FTA could benefit companies and people in both countries.
