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Private firms taking the lead in ODI

Sunday,Oct 09, 2016

From: China Daily

 

Companies surpass SOEs for first time by contributing 65.3% to outbound investment

Private companies have for the first time overtaken Chinese state-owned enterprises in terms of outbound direct investment, according to government report.

They lead in both the amount invested and the number of mergers and acquisitions overseas.

The change comes after ODI surpassed foreign direct investment last year, also a new phenomenon. Private companies account for 65.3 percent of total ODI, which was $145.7 billion by the end of last year, says the 2015 Statistical Bulletin of China’s Outward Foreign Direct Investment, released on Sept 22.

Meanwhile, ODI surged by more than 18 percent last year, exceeding the $135.6 billion in FDI, according to the report jointly issued by the Ministry of Commerce, the National Bureau of Statistics and the State Administration of Foreign Exchange.

"Private companies have really become an important force in driving the growth of outbound investment," says Zhang Xiangchen, the Commerce Ministry’s deputy international trade representative. Private deals accounted for 75.6 percent of all overseas acquisitions, he adds.

Large, privately owned enterprises are on an overseas shopping spree to either upgrade their technology or diversify their businesses. One frequent shopper, Chinese aviation and shipping conglomerate HNA Group, bought total foreign assets worth at least $17 billion in 2015. This year, the company advanced its global expansion with acquisitions that included paying $114 million for a 13 percent stake in airline company Virgin Australia Holdings.

Even though SOEs still have a competitive edge over their private peers in highly regulated industries such as electricity, energy and mining, it has not dimmed the enthusiasm of private companies for overseas growth.

Wang Huiyao, director of the Center for China and Globalization (CCG) in Beijing, says private companies tend to be flexible and can respond quickly to changing environments overseas.

"The private sector contributes more to ODI because it is growing," he says. "The national anti-corruption campaign has also slowed the state sector’s process of going global, because those enterprises have to adjust their strategies due to the introduction of new executives and leaders."

As Chinese companies spend more overseas, the government is taking measures to ensure the security of assets and the growing number of Chinese working abroad, which already stands at 1 million, says Zhang of the Commerce Ministry.

"We’re producing guides to foreign investment as well as risk assessment reports every year to assist Chinese investment in guarding against risks. We’re also encouraging Chinese investors to bolster their risk management abilities."(By Lyu Chang)

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