Outbound deals continue to gain momentum in first five months

EU, ASEAN major targets of investment from China, says Commerce Ministry

Outbound direct investment from China to the European Union and the Association of Southeast Asian Nations rose by 367.8 percent and 78.4 percent respectively during the first five months of the year, thanks to the depreciation of the euro and the "Belt and Road Initiative".

The Silk Road Economic Belt and the 21st Century Maritime Silk Road initiatives were put forward by President Xi Jinping in 2013, with the purpose of rejuvenating the two ancient trading routes and further opening up the markets.

China's ODI in the non-financial sector rose by 47.4 percent to $45.41 billion in the first five months. The EU, the United States and countries along the Belt and Road trading routes were the main recipients of Chinese capital, data released by the Ministry of Commerce showed on Thursday.

Investment totaling $35.86 billion flowed to seven major destinations from China, including the EU, ASEAN, Australia, the US and Russia during the period, accounting for 79 percent of the nation's total ODI. The ministry, however, did not provide ODI figures for each country and region.

Shen Danyang, spokesman for the Ministry of Commerce, said though the global demand for investment is huge, Chinese investors are more inclined to choose mature markets like the EU or US as they have well-developed industries and infrastructure, robust consumer population and legal environment. "The depreciation of the euro has lowered Chinese companies' costs as they acquire European companies or set up branches, as well as research centers while expanding their presence in developed markets," said Shen.

Chinese companies conducted $38.41 billion worth of equity-debt investment between January and May. Prominent among these deals were China National Chemical Corp's $8.1 billion acquisition of Italian tiremaker Pirelli SpA, and Shanghai-based Fosun International Ltd's joint venture with British travel company Thomas Cook Group Plc.

In terms of the investment volume, the top three destination countries in Europe for Chinese investors were the United Kingdom, Switzerland and Germany.

Sang Baichuan, director of the Institute of International Business at the University of International Business and Economics in Beijing, said as China continues to internationalize, the focus of ODI activities is also shifting.

Previously, State-owned enterprises sought to acquire resources in emerging markets such as Africa or Latin America. But, now domestic companies are more interested in gaining market share and core capabilities from developed European markets such as the United Kingdom, France and Germany, he said.

"Carrying out merger and acquisition activities in Europe is a practical option for Chinese enterprises as they pursue new profit drivers," said Sang. "It is also an option to access cutting-edge technology, as well as brand and management experience in global market."

A research by Beijing-based China International Chamber of Commerce, found that only 22 percent of China's ODI activities had the goal of acquiring natural resources over the past three years. At the same time, more than 70 percent of the deals were aimed at accessing technology, brands and market share in the global market, particularly in developed economies.

China's service exports rose by 10.7 percent to $74.2 billion during the January-May period. Overseas construction, transportation, telecommunication and computing and information services were the main contributors to the growth of this sector, indicating services exports are increasingly accounting for a larger share of China's foreign trade.