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China Becomes World Investor
Cover Stories Series 2015> China Becomes World Investor
UPDATED: February 16, 2015 NO. 8 FEBRUARY 19, 2015
You Can Bank on China

China's outbound investment reached $116 billion in 2014. If Chinese firms' investment through third-party financing is included, the total investment would amount to $140 billion, outweighing the country's capital inflows for the first time in history. In the same year, foreign direct investment in China totaled $119.6 billion.

China's role has transformed from that of a recipient of foreign investment, which it has assumed ever since the reform and opening-up initiatives were introduced in the late 1970s, to a main capital investor in the world. Those countries and regions that need foreign capital to drive growth now have a reliable new source of investment to which to turn.

The motivations behind China's overseas investment are economic, rather than political, in nature. Unlike some developed countries that restrict or prohibit their corporations' investment in certain developing countries for political reasons, China seeks mutually beneficial outcomes for all parties in its outbound investment. From the point of view of Chinese entrepreneurs, each country should have the right to use foreign investment as a tool to develop itself, regardless of its political system.

As China's outbound investment used to be mainly directed toward resource-based industries, some countries have accused it of stealing the resources. As a point of fact, China's capital outflows have always been market-oriented, and the decision to invest was determined by supply and demand. At present, Chinese investment is shifting toward the areas of shipbuilding, high-speed railway construction and the manufacturing of electric and telecom equipment, industries in which the country possesses advanced technologies. Investment programs in these fields will enable recipient countries to benefit from both China's financial support and technological prowess.

Currently, sources of China's outbound investment are diverse, including both state-owned and private companies. Individuals in business have the autonomy to choose their investment destinations. However, some Chinese investment programs have been obstructed by politicized excuses in some countries, which explains why China's outbound investment tends predominantly toward underdeveloped countries and regions.

China is the world's second largest economy and has a large quantity of foreign exchange reserves. In the future, the fruits of China's success may play a bigger role in driving the growth of other countries and regions around the world.

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