Mainland firms look abroad for opportunities as pressure in the domestic market intensifies Mainland companies invested nearly US$7 billion abroad last year and the figure is expected to more than double in the next few years. According to the website of the Ministry of Commerce, mainland firms made non-financial direct investments last year of US$6.92 billion, up 25.8 per cent on 2004. Of the total, 60 per cent went to Asia, 16 per cent to Latin America, 6.9 per cent to Africa and 6.3 per cent to Europe. However, many economists consider the figure an understatement because it includes only projects reported to the ministry. 'Within five years, annual foreign investment by Chinese firms will reach US$10 billion to US$15 billion a year,' said Xue Qiuzhi, an economist at the management school of Fudan University. Among the target countries is Sweden, whose Invest in Sweden opened offices in Beijing and Shanghai in 2003 and has succeeded in attracting investment from more than 40 companies in telecommunications, real estate, trade and other sectors. 'The growth in such investment will double. The trend is very clear,' the office's chief representative Eddie Chen said. London's municipal government announced earlier this month that it would open offices in Beijing and Shanghai to attract mainland investment. Hu Jingyan, head of the overseas investment division of the Ministry of Commerce, said mainland companies invested abroad because of the intensifying pressure in the domestic market and to avoid worsening trade frictions and barriers in foreign markets. 'As our [gross domestic product] grows and companies become richer, they see more opportunities to invest. The figure is still very low, with our outward investment just 0.45 per cent of global foreign direct investment in 2003,' he said. He said the investment was concentrated in labour-intensive sectors, resource development and manufacturing, mainly in neighbouring countries - Hong Kong, South Korea, Thailand, Cambodia and Japan. However, Mr Hu said administrative obstacles continued to block the flow of investment. 'We are short of experience and should co-operate with local firms. We should concentrate on developing countries and expand into developed ones,' he said. The main investors were large state companies while private firms were beginning to follow suit. The principal sectors for investment are information technology and communications, mining and manufacturing with about half the investments coming in the form of mergers and acquisitions, mostly involving telecommunications, vehicle manufacturing and resource development. The biggest investors were companies from Beijing, Shanghai, Zhejiang, Guangdong and Shandong.