Top 10 trends in China’s outbound investment issued by CCG

Localization is becoming a new trend in China’s outbound investment as more Chinese companies are striving to ensure their business operation abroad  generate both economic benefit and positive impact on local society, according to a new report CCG released on the latest “China Firms Going Abroad 50 Forum.”

The event, hosted by the State Council’s Counselor Office and organized by CCG, gathered over 200 policymakers, think tank scholars and business executives to examine the new development of Chinese companies going abroad and explore how to leverage the “Belt and Road” Initiative to advance their globalization, including Director of State Council’s Counselor Office Wang Zhongwei, Former Vice Minister of MOFCOM Chen Jian, Former Senior Vice President of the World Bank Group Lin Yifu, and Deputy Secretary General of NDRC Zhou Xiaofei.

The new report, according to CCG President Wang Huiyao, is drafted based on a long-term study of nearly 3,000 cases of China outbound investment. It reviews the history of the globalization process of Chinese companies in the past four decades, and summarizes 10 new trends in the current development.

The report points out that the first 30 years since the reform and opening-up policies have witnessed robust growth of FDI in China, while the past decade has seen a rapid surge of the investment abroad by Chinese companies. In 2015, China outbound investment, for the first time in history, has exceeded FDI. This trend gained more momentum in 2016 as an increasing number of Chinese companies were seeking global expansion, making China a net investor.

The report identifies 10 new trends in China outbound investment:

1. The outbound investment by the Chinese companies has been on the increase for 10 consecutive years, which hit its historical record in 2016 at US$170 billion.
2. Geographically, China outbound investment was still concentrated in Europe, North America and Asia Pacific in 2016. The United States, in particular, remains a top destination for Chinese investors and attracted a total of US$ 46 billion of investment from China, two times moer than the previous year.
3. Chinese outbound investors become more diversified, and privately-owned small and medium sized companies became particularly active abroad. In 2016, they completed more investment projects than 2015, although the total investment value slightly declined.
4. Among all the industrial sectors, manufacturing has seen more China outbound investment in 2016, accounting for 1/3 of the total. The share of IT industry also increased 3 percentage points to 11%. The investment in real estate abroad started to retreat and decline from 12% in 2015 to only 5% in 2016.
5. Most China outbound investment has been made through M&A, followed by green field investment. In 2016, the number of M&A cases by Chinese companies has hit a new record level at 772. In the meantime, green field investment has lost some momentum since Chinese companies are more looking at the opportunities for transformation and upgrading.
6. The “Belt and Road” Initiative is bringing new opportunities for Chinese companies investing abroad, especially in the fields of energy and infrastructure development.
7. From their outbound investment strategies, Chinese companies have shown their priority on the full supply chain development around the world to increase their global competitiveness. International perspectives, globalized management and localization have become three key elements in their strategies. They also attach greater importance to the sustainable development that integrate economic benefit and social value.
8. Chinese companies have employed localization strategy in their business operation abroad, seeking to accomplish win-win cooperation that can mutually benefit corporate and local society.
9. Chinese companies have significantly improved their cooperation and coordination in outbound investment to reduce the risks and optimize resource, and the government also adopted policies and measures to encourage the collective investment activities.
10. The elevation of branding competitiveness has become a major motivation for Chinese companies to invest abroad, as they increased the awareness of brand influence in the global market.

Besides the release of the report, the Forum held several panel sessions to respectively discuss the issues including e-commerce, small and medium-sized enterprise development, free trade zones and light industry development.