Overseas investments raise key China questions

Beijing's bid to ramp up overseas investments could be as much a worrying sign that profitable opportunities at home are shrinking as it is evidence of the mainland's climb up the global value chain.

The optimists see a rising power spreading its wings with a flurry of outbound investments that in the first 11 months of this year reached US$89.8 billion - up 11.9 per cent year on year, taking the overall total to about US$900 billion since 2005.

Others say the shift in emphasis towards overseas spending and a tapering of inbound investments show most of the value has been squeezed out of the low-cost factory model that has been at the core of China's blistering growth for most of the past 30 years, turning it into the world's second-biggest economy.

Derek Scissors, a long-time China watcher and resident scholar at the American Enterprise Institute think tank in Washington, said the government's focus on overseas direct investment (ODI) and its objective to see it surpass inbound investment in the near future was an unambiguously bad sign.

"For outward flows to exceed inward in a still-developing economy is a clear and discouraging signal that opportunities at home have become limited," he told the South China Morning Post.

Scissors is an authority on mainland overseas investments and compiles the world's most comprehensive, publicly available database on overseas Chinese investments and major projects valued at more than US$100 million.