The steady growth of China's outbound investment since the turn of the new millennium has generated mixed responses to Chinese capital. A main point of media focus, it has been both welcomed and called into question.

To put China's outbound investment in perspective, China Today held an exclusive interview with He Zhenwei, executive deputy secretary-general of China Overseas Development Association.

He holds that the "going global" strategy operates in the context of China's main economic policy during its 35 years of reform and opening of absorbing foreign investment. In his view, that China's empowered enterprises now invest abroad and so hone their international competitiveness is an inevitable feature of the country's drive to join the globalization trend. He moreover holds that, having greatly benefited from foreign investment, it is now time for China to venture abroad and bring benefits to humankind in general as well as improve the wellbeing of its own people.

Misconceptions

Reports in certain foreign media contend that China's outbound investment gives preference to resources-related projects, the country's main aim being to exploit the resources of others. He Zhenwei holds that such sensationalized media hype, as sparked off by large enterprises like China Petrochemical Corporation (Sinopec Group) and China National Offshore Oil Corporation's acquisition of resources-related projects, misleads the public into believing that the sole aim of China's big state-owned enterprises is to lay claim to overseas resources.

China's outbound investment took off relatively late, standing at US $2.7 billion in 2002, rising to US $2.85 billion in 2003, and climbing to US $26.5 billion in 2007. It was not until 2008 that outbound investment exceeded US $30 billion, having skyrocketed that year to a volume of more than US $55.9 million.

The steep increase in 2008 undoubtedly related to the world financial crisis. Prior to 2008 the high thresholds that western countries set for foreign investment left few such opportunities for China's enterprises. The world financial crisis of 2008, however, interrupted the financial supply chains of many countries, leading them to make more fields accessible to foreign investment. Chinese enterprises like Zhejiang Geely Holding Group and the Sany Group benefited from these open policies, the former thus acquiring Volvo and the latter purchasing Germany-based Putzmeister. But the manufacturing industry is the main focus of China's new outbound investment.

"I believe China's overseas investment has boosted the economic recovery of some countries and propelled their industrial structural adjustment," He said. Taking Russia as an example, He elucidated this point: Since Russia is in the throes of economic transition, a vast amount of capital has flowed into high-profit energy fields. Russia consequently welcomes the entry of China's capital into its processing and manufacturing industry, because it creates jobs and impels economic restructuring. The leapfrog development of China's overseas investment in 2008, therefore, demonstrates that the global financial crisis gave China access to certain developed countries' manufacturing industries rather than creating opportunities for the purchase of overseas resources. China itself experienced a declining demand for resources during the crisis.

He Zhenwei further expounded on the distribution of China's overseas investment, using the U.S. as an example. The U.S. economy had long been structurally dominated by finance and virtual economy. America has since acknowledged that it is the real economy that is now crucial to its economic recovery. This is where China's investment has been mainly directed. It has significantly promoted the U.S.'s economic restructuring. U.S. Ambassador to China Gary Locke said in his speech at the 5th China Overseas Investment Fair that China's total investment in the U.S. over the previous 21 months had reached US $18.5 billion -- equal to the total sum over the preceding 11 years. This statistic confirms the remarkable growth of China's investment in the U.S. But obtaining approval for investment in its resources sector is nonetheless still difficult.

"China's overseas investment is diversified, covering almost all economic sectors, mainly concentrated on infrastructure and manufacturing. Business service heads the investment sector, and the mineral resources sector ranks fourth," He said. Only a fraction of the 16,000 Chinese enterprises that have gone global are resource enterprises.

Contribution to World Food Safety

The recent China-Ukraine agricultural cooperation is a focus of global attention. Certain media claim that China bought land in the Ukraine to plant crops and so ensure its own food safety.

He Zhenwei's response to such claims: "There are misunderstandings about this bilateral agricultural cooperation. No Chinese enterprise has bought land in the Ukraine, because its laws prohibit such purchases by foreign entities within its boundaries. China-Ukraine agricultural cooperation is based on land leasing, but media reports have distorted this fact." He went on, "China's policies encourage international cooperation in agriculture. As we all know, agriculture is one of the most important industries in China and involves hundreds of millions of people. This has equipped the country with ample expertise and experience in this regard. We've leased land in Africa, Russia and the Ukraine, at the same time sharing our experience with locals."

The Ukraine is an agricultural country, once dubbed the "granary of the former Soviet Union." It has vast arable land, much of it uninhabited, and a small population. No matter grain produced in the country stays there, is transported to China or sold to another country, the leasing of uncultivated land by Chinese enterprises is a contribution to world food safety.

"Whether or not grain produced in the Ukraine goes to China implies nothing," He said. The Ukraine is an exporter of agricultural products whose destinations include Europe, the Middle East and now China. "Through contacts with Ukrlandfarming, one of the Ukraine's leading agricultural enterprises, I have learned that the group owns 530,000 ha. of land, much of it lying fallow. The group has expressed willingness both to cooperate with China in utilizing its idle land and to export the grain it produces to China," He said.

China owns much unused agricultural resources, capital and laborers, which makes China-Ukraine agricultural cooperation beneficial to both sides.