China Economy

China’s overseas investment soars to record, study suggests

Foreign direct investment from the mainland rose to US$190 billion last year, fuelled by spending in technology and advanced manufacturing, report says

PUBLISHED : Thursday, 12 January, 2017, 12:22pm
UPDATED : Thursday, 12 January, 2017, 1:31pm

China’s foreign direct investments soared 40 percent to a record US$190 billion in 2016 from a year earlier, according to a study released on Wednesday by the Berlin-based Mercatur Institute for China Studies and the Rhodium Group.

Chinese investments in the European Union rose 77 per cent to over US$37 billion in 2016, with Germany accounting for 31 percent of total Chinese investment in Europe, according to the study by the institute and Rhodium, a consultancy specialising in Greater China and India.

Chinese investors were particularly interested in acquiring technology and advanced manufacturing assets, the report said.

China direct investment in the US set to top US$20b for the first time this year

At the same time, European investments in China totalled just US$8.5 billion, dropping for a fourth straight year, the report said.

It said the decline reflected slowing economic growth, looming overcapacity and lower margins in the Chinese market, as well as persistent formal and informal market access barriers for foreign companies in China.

“The growing gap in two-way investment flows is fuelling European perceptions of a fundamental lack of ‘reciprocity’ between the EU and China,” the report said.

European leaders were increasingly concerned that the sale of core industrial technology could pose risks to Europe’s industrial base given new Chinese policies that viewed overseas deals as a way to displace foreign companies in China and elsewhere, it said.

Why China is investing heavily in Europe

Germany is reviewing its powers to block foreign acquisitions and pushing for European measures to safeguard key technologies after a spate of Chinese takeovers, but experts say changes will be limited given the government’s commitment to free trade.