Having skyrocketed last year, China’s offshore foreign direct investment has retreated dramatically this year down by 50%, released in the data by Ministry of Commerce China.
The data indicated that up to May 2017, Chinese investors had conducted direct investment on 3100 offshore projects across from 145 countries with a total value of US$34.59 billion. This was down by 53% from the same level last year.
Bai Ming, deputy director of the international market research institute under the Ministry of Commerce commented that the rapid expansion of China’s overseas FDI in 2016 was closely related to the government policies promoting businesses “going out” to extend market share overseas.
In addition, there were some Chinese businesses intended to move their capital out of China through trade and investment due to pessimistic expectation on the value of the Chinese yuan.
Therefore an objective approach should be deployed for the analysis of the Chinese offshore direct investment. To a degree, the current reduction of it is a rationalised outcome.
Liu Xuezhi, a senior researcher at Centre for Financial Research, Bank of Communication, China, expressed in an interview with China’s Daily Economic News that the fundamental of the Chinese economy has improved in 2017. As a result the pressure on outflow of capital has eased to a certain extent.
In addition the government has intensified control on offshore investment.
Since last December, four government bodies including National Development and Reform Commission, Ministry of Commerce, China’s Central Bank and State Administration of Foreign Exchange jointly lift bars on offshore direct investment, particularly in areas including real estate, hotel, entertainment industry and sport club.
Consequently China’s offshore direct investment reduced by 39% in December 2016 and continuously shrinking at a rate of 30% per month since January 2017.
However the Chinese offshore FDI is still growing in sectors ranging from business service, manufacture, infrastructure, and to IT industries in the first five months of 2017. It should be highlighted that the Chinese offshore FDI has increased by 88.8% in the construction industry and 45% in the IT industry this year.
Forming consortium on foreign infrastructural projects has become a fashion to Chinese companies that not only reduces the risk to individual companies but also makes it easy form them to apply for bank loans.
China Foreign Chengbao Engineering Chamber Of Commerce published a data that, thanks to the “Belt and Road” initiative, Chinese entities have signed 2128 contacts on infrastructural projects in 61 countries in the period from January to May 2017. The total value of these projects contracted reached to US$38.47 billion, which accounted for 51% of the total Chinese offshore projects. These projects are concentrated in power generation, transportation, building and manufacturing.