Total outward direct investment (ODI) by the mainland surged to US$21.16 billion last year, to reach almost a third of foreign investment inflows as the central government encouraged companies to secure resources and establish competitive positions in the global marketplace. Investment in non-financial sectors overseas increased 43.8 per cent to US$17.63 billion, accounting for 83.3 per cent of total mainland ODI last year, according to a joint report released yesterday by the Ministry of Commerce, the National Statistics Bureau and the State Administration of Foreign Exchange. The growth rate for investment by financial firms, which came to US$3.53 billion last year, was not disclosed. It is the first time the government departments have included financial sector ODI in the annual report. The government is encouraging companies to accelerate investment overseas as the country's foreign reserves, already the world's largest, surged to US$1.33 trillion at the end of June. At present the country ranks 13th in ODI. People's Bank of China governor Zhou Xiaochuan said on September 8 that the bank would adjust financial policies to fund domestic companies and financial institutions' outbound investments and increase foreign-exchange outflows. ODI by mainland companies was set to increase rapidly, said Jing Ulrich, the chairman of China equities at JP Morgan Securities. 'We expect China's ODI to overtake FDI inflows within the next decade,' she said. 'Chinese funds are becoming a major force in global markets.' In one recent step in this direction, the central government in May invested US$3 billion to buy a 9.7 per cent non-voting stake in Blackstone Group. In July, China Development Bank said it would pay Euro2.2 billion (HK$23.8 billion) for a 3.1 per cent stake in British investment bank Barclays, with a possible increase in its stake to follow. State-owned companies account for 81 per cent of accumulated investments, and private enterprises 1 per cent. Firms involved in business services, mining, financial and retail industries have invested about 70 per cent of the total amount. AEA International Business Consulting chairman Wang Huiyao said: 'Big mainland companies favour energy and technology projects. Small companies, for example those in Zhejiang, are moving manufacturing operations of small hardware, shoes and lighters to other Asian countries where costs are cheaper. And the trend is gaining steam.' Investments by mainland companies in international markets would reach at least US$30 billion annually by 2020, Chen Jian, an assistant commerce minister, forecast last month. About 50 per cent of last year's investment took the form of acquisitions, according to the government report, while Asia and Latin America attracted 90 per cent of non-financial investments. The accumulated mainland ODI climbed to US$90.63 billion at the end of last year, or 0.85 per cent of the world's accumulated outward investment. Non-financial investment hit US$75.02 billion, or 82.8 per cent of the country's total. China accounted for 2.72 per cent of global ODI last year, according to the United Nations Conference on Trade and Development. Spending faster Beijing is encouraging companies to accelerate investment overseas The total amount of mainland outward direct investment as of the end of last year, in US$: $90b
