BEIJING, China (AFP) – China’s inexorable economic rise is set to see it become a net global investor after decades of Western money flowing into the country, but analysts warn the change offers risks as well as profits.
Chinese oil behemoth CNOOC’s $15 billion acquisition of Canada’s Nexen, completed last year, was just a fraction of the $625 billion the country has invested abroad, much of it resources driven and also taking in other sectors including agriculture, manufacturing and banking.
But the looming changeover may be a sign that China is becoming less attractive as an investment destination itself, while some deals have been less successful than others. Chinese external acquisitions were strictly controlled until 2000 when the Communist Party listed overseas investment as a new growth strategy, widely described as “going out” to secure technology, resources and market access.
Overseas direct investment (ODI) has since ballooned – along with China’s foreign exchange stockpile – and reached $90.2 billion in 2013, more than 30 times what it was a decade previously.
Incoming foreign direct investment (FDI) stood at $117.6 billion last year, official data showed, and the latest figures on Tuesday showed the gap between them has narrowed substantially in 2014.
China invested $4.19 billion in non-financial sectors in the US alone in the first 10 months of this year, the commerce ministry said, almost twice as much as the $2.32 billion that flowed in the other direction. “It is a matter of time before China’s overseas investment exceeds the foreign investment it receives,” assistant commerce minister Zhang Xiangchen told reporters last month.
“Even if it is not realised this year, it will in the near future. China is soon to become a net capital exporter.”
China is now the world’s third largest investor after the United States and Japan, according to the United Nations Conference on Trade and Development, and Beijing’s figures show the US and Australia as its top recipient nations.
But the spending spree has been largely driven by big state-owned enterprises (SOEs), backed by state banks as they purchase mineral and energy resources, sparking concerns over China’s growing economic power and possible political motives.