Rise of non-public firms proves global maturity: experts
Given the sluggish economy across the globe, China's outbound direct investment hit a record high in 2015, which experts noted was fueled by the demand from the world market, government policy support as well as the solid strength of domestic enterprises.
China's outbound direct investment went up for the 13th consecutive year, reaching $145.67 billion in 2015, an increase of 18.3 percent year-on-year and accounting for 9.9 percent of global investment flow, an official with the Ministry of Commerce (MOFCOM) said Thursday.
Zhang Xiangchen, deputy international trade representative with MOFCOM, said at a press conference held in Beijing that it was the first time that China ranked as the second largest country in outbound investment flow (behind the US) across the world.
"About 20,200 domestic investors have set up 30,800 directly invested companies in 188 countries and regions in the world as of the end of 2015… and by 2015, domestic outbound direct investment has covered all industries," Zhang noted.
During the first eight months of 2016, the flow of Chinese outbound investment has primarily gone to sectors including business services, manufacturing, wholesale, retail and information transmission and software and information technology services, accounting for 25.7 percent, 17.9 percent, 15.7 percent and 12 percent of the country's total outbound investment, respectively, Liu Jianying, an associate research fellow at the Chinese Academy of International Trade and Economic Cooperation, told the Global Times on Thursday.
Liu noted that the demand of the world market plays a vital role in driving China's outbound investment.
"Both developed and developing economies have rolled out many favorable measures for attracting foreign investment as they are in need of capital for their own growth, which offers a sound environment for Chinese companies to go global," she said.
Moreover, China actively initiated the "Belt and Road" initiative in 2013 and conducted international cooperation on production capacity in recent years. All of these government policies have facilitated domestic companies expanding in the overseas markets, according to Liu.
Experts said that Chinese companies now have a strong willingness to go global because they need to make good use of the world market and resources to transform and upgrade themselves as China undergoes economic restructuring.
Under globalization, the country will not only focus on going global, but will also eye opening more to foreign capital, Premier Li Keqiang said Tuesday night at a banquet in New York during a visit to the US, said media reports.
We not only need foreign capital to promote growth, but also new management experience and advanced technology, Li said.
Challenges remain
As Chinese capital has actively flowed to the world market, domestic investors face many challenges.
Although plenty of outbound investments have been made by domestic firms, their profits are not ideal, said Zhuang Rui, deputy dean of the Institute of International Economics at Beijing-based University of International Business and Economics.
In 2011, 22.4 percent of Chinese companies that sought outbound investment reported losses, according to media reports.
Zhuang told the Global Times on Thursday that China's outbound investment would face potential risks in certain countries and regions.
"For example, the economic level of some countries and regions along the 'Belt and Road' initiative is not high and some of their political environments are not stable," she noted.
Zhuang said that "a risk assessment and prevention system should be set up to learn about laws, cultures and customs in outbound investment destinations and the system should be updated dynamically and open to domestic companies."
The risk assessment should be expected to be conducted during the whole process in outbound investment, Zhuang noted.
A rising power
Zhang, the MOFCOM official, also said that non-public companies have become a crucial power in China's outbound investment and that their cross-border merges and acquisitions (M&As) accounted for 75.6 percent of China's total M&As in 2015.
The rise of non-public companies in overseas M&As is a mark that domestic firms are entering a new stage in the globalization process, and are also growing more mature in marketization, experts said.
Companies like real estate and entertainment conglomerate Dalian Wanda Group, smartphone maker Huawei Technologies Co, aviation conglomerate HNA Group are among the top 100 domestic firms in terms of outbound investment stock, according to Zhang.
