China’s Outbound Direct Investment Outflows Now The World’s Largest

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By Chris Devonshire-Ellis 

China’s outbound direct investment (ODI) rose 12.3% last year to reach US$153.7 billion, ranking first globally, according to China’s Ministry of Commerce in an official report released today (September 29).

Chinese influence in global foreign direct investment continued to grow, with its ODI flow accounting for 20.2% of the global total, stated the report, which was jointly released by China’s Ministry of Commerce, the National Bureau of Statistics, and the State Administration of Foreign Exchange.

By the end of 2020, the country’s ODI stock stood at US$2.58 trillion. China’s investment had funded 45,000 overseas enterprises in 189 countries and regions last year, with projects and investments in 80% of the world’s countries and regions.

Investment into countries along the Belt and Road has climbed steadily, with the total amount expanding 20.6% in 2020 to US$22.54 billion. Over 70% of China’s ODI flowed into leasing and business services, manufacturing, wholesale, and retail as well as financial sectors last year, all of which recorded investments more than US$10 billion.

In 2020, Chinese-funded enterprises overseas employed about 2.18 million local staff, accounting for 60.6% of the total number of employees in these companies.

Anticipating that the global situation will remain complex in 2021, Beijing has said it will facilitate the development of overseas enterprises, improve pandemic prevention, control work, and deepen high-quality cooperation under the Belt and Road Initiative.

Criticism however has been swift, with analysis in the Financial Times and other Western media based on US AidData research stating that China has made an additional US$385 billion of loans to low-income countries that do not appear on recipient government balance sheets as they are instead booked by privately held companies. As a result, 42 countries have actual China debt more than 10% of their GDP. What the FT doesn’t stress is that the data used is between four to twenty years old, that the US Government debt to GDP ratio is currently 107.6%, and that its publication coincided with US President Joe Bidens press conference about the “Build Back Better World” project, the US own version of China’s Belt & Road Initiative.

Competition, it seems to lend money globally is going to become more intense, which may lead to some lurid and inaccurate headlines – but ultimately will be beneficial if used wisely.

 

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Silk Road Briefing is written by Dezan Shira & Associates. The firm has 28 offices throughout Asia, and assists foreign investors into the region. For strategic advisory and business intelligence issues please contact the firm at silkroad@dezshira.com or visit www.dezshira.com

 

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