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CHINA has been a recipient of
foreign direct investment （FDI） for some time， starting when the country embarked on reforms and opened-up in the late 1970s. Inflows of FDI were US $1.956 billion in 1985 and by last year had risen to a staggering US $111.716 billion， with an annual increase of 15.54 percent. During that time the number of projects receiving foreign investment increased from 3，073 to 27，712. The inbound investments have been mainly from free ports， such as Hong Kong， and countries and regions including Japan， South Korea， the U.S.， and the European Union.
China is a relative newcomer to FDI， having participated for just a decade， but has done so with much speed. Its non-financial FDI surged from US $2.9 billion in 2003 to US $77.22 billion in 2012， with an annual increase of 38.85 percent.
There were 34，000 Chinese companies making investments abroad in 2003， and the figure rose to 44，000 in 2012， covering more than 140 countries and regions. FDI outflows have gone mainly to Singapore， Australia， the U.S. and free ports， such as Hong Kong.
China’s outbound FDI is growing faster than the world’s average and that of some developed economies， including the U.S.， Japan and the U.K.
According to statistics from the United Nations Conference on Trade and Development （UNCTAD）， the world’s FDI volume climbed from US $570.7 billion in 2003 to US $1.7 trillion in 2011， with an annual increase of almost 12.85 percent. The U.S.’s annual growth during that period was marginally faster at 13.26 percent， while Japan’s grew at 16.56 percent and the U.K.’s 6.22 percent.
China’s non-financial cross-border direct investments in 2012 exceeded its FDI inflows in 2007 before the world economic crisis hit， occupying three percent of the world’s total and putting it among the top 10 investors in the world.
Over several decades of reform and openingup， China’s economic strength has improved significantly and its companies have grown steadily more competitive， contributing to the fast rise of its outbound FDI. China has supported its businesses entering the world market by offering fiscal and financial incentives and assistance in aspects like research and development. Among its beneficiaries， private companies appear to be the most motivated towards making investments abroad.
Since the founding of the PRC in 1949， even when it faced economic difficulties at home， China has always offered free assistance and support to developing countries around the world， including sending medical teams and building infrastructures without any conditions attached. This has created a sound environment and solid foundation for its later investment as well as improving local standards of living. There is much room for further development of FDI from China. China is now the world’s second largest economy， but its FDI outfl ow as a percentage of gross fixed capital formation（GFCF） is lower than not only developed countries like the U.S.， Japan and the U.K.， but also the world average. From 2003 to 2011， China’s outbound FDI accounted for no more than six percent of its GDP， while in the corresponding period the ratio in developing countries surpassed 12 percent， the world average level surpassed 25 percent， and the U.K. and France ran over 50 and 40 percent respectively.
Furthermore， the forms of China’s outward investments are limited. Lack of experience working in overseas markets combined with weakness in fi nancing and planning has meant that Chinese companies prefer acquisition. According to the Ministry of Commerce， the price tag on overseas acquisitions by Chinese companies increased from US $3 billion to 27.2 billion from 2004 to 2011， accounting for 23 to 55 percent of China’s FDI. While around the world more diversifi ed investment methods are in use， Chinese companies rarely adopt other， more mature means of investment.
As we all know， China’s economy is based on manufacturing and leads the world in exports of manufactured goods. This vantage is however not refl ected in the composition of China’s overseas FDI. At the end of 2011， the top six industries of China’s overseas direct investment stock were rental and commercial services （33.5 percent）， the financial sector （15.9 percent）， mining （15.8 percent）， wholesale and retail（11.6 percent）， manufacturing （6.3 percent）， transportation， storage， and postal services （5.9 percent）. As there are only a handful of homegrown transnational manufacturing companies， they are not yet a force to be reckoned with.
Finally， China’s transnational companies need to further improve their competitiveness and better fulfill social responsibilities. The situation in a host country is often quite different from that in which these enterprises were cultivated. In China， companies have had to deal with governmental management， planning and supervision， but think little of the interests of communities， NGOs， workers’ unions and multiple political parties. For overseas investors， the fi rst hurdle comes from understanding local politics and culture. In addition to learning about and complying with local laws and regulations， they also have to balance long-， mediumand short-term interests in a new environment， fulfi ll social responsibilities， and work towards mutual development with local enterprises.
The Chinese government is signing bilateral investment protection agreements with more and more countries in order to avoid double taxation and guarantee bilateral interests and those of enterprises and their staff. In the coming years， China is expected to make better use of both incoming and outgoing FDI， expanding its investment beyond borders， and encouraging more companies to invest abroad.
foreign direct investment （FDI） for some time， starting when the country embarked on reforms and opened-up in the late 1970s. Inflows of FDI were US $1.956 billion in 1985 and by last year had risen to a staggering US $111.716 billion， with an annual increase of 15.54 percent. During that time the number of projects receiving foreign investment increased from 3，073 to 27，712. The inbound investments have been mainly from free ports， such as Hong Kong， and countries and regions including Japan， South Korea， the U.S.， and the European Union.
China is a relative newcomer to FDI， having participated for just a decade， but has done so with much speed. Its non-financial FDI surged from US $2.9 billion in 2003 to US $77.22 billion in 2012， with an annual increase of 38.85 percent.
There were 34，000 Chinese companies making investments abroad in 2003， and the figure rose to 44，000 in 2012， covering more than 140 countries and regions. FDI outflows have gone mainly to Singapore， Australia， the U.S. and free ports， such as Hong Kong.
China’s outbound FDI is growing faster than the world’s average and that of some developed economies， including the U.S.， Japan and the U.K.
According to statistics from the United Nations Conference on Trade and Development （UNCTAD）， the world’s FDI volume climbed from US $570.7 billion in 2003 to US $1.7 trillion in 2011， with an annual increase of almost 12.85 percent. The U.S.’s annual growth during that period was marginally faster at 13.26 percent， while Japan’s grew at 16.56 percent and the U.K.’s 6.22 percent.
China’s non-financial cross-border direct investments in 2012 exceeded its FDI inflows in 2007 before the world economic crisis hit， occupying three percent of the world’s total and putting it among the top 10 investors in the world.
Over several decades of reform and openingup， China’s economic strength has improved significantly and its companies have grown steadily more competitive， contributing to the fast rise of its outbound FDI. China has supported its businesses entering the world market by offering fiscal and financial incentives and assistance in aspects like research and development. Among its beneficiaries， private companies appear to be the most motivated towards making investments abroad.
Since the founding of the PRC in 1949， even when it faced economic difficulties at home， China has always offered free assistance and support to developing countries around the world， including sending medical teams and building infrastructures without any conditions attached. This has created a sound environment and solid foundation for its later investment as well as improving local standards of living. There is much room for further development of FDI from China. China is now the world’s second largest economy， but its FDI outfl ow as a percentage of gross fixed capital formation（GFCF） is lower than not only developed countries like the U.S.， Japan and the U.K.， but also the world average. From 2003 to 2011， China’s outbound FDI accounted for no more than six percent of its GDP， while in the corresponding period the ratio in developing countries surpassed 12 percent， the world average level surpassed 25 percent， and the U.K. and France ran over 50 and 40 percent respectively.
Furthermore， the forms of China’s outward investments are limited. Lack of experience working in overseas markets combined with weakness in fi nancing and planning has meant that Chinese companies prefer acquisition. According to the Ministry of Commerce， the price tag on overseas acquisitions by Chinese companies increased from US $3 billion to 27.2 billion from 2004 to 2011， accounting for 23 to 55 percent of China’s FDI. While around the world more diversifi ed investment methods are in use， Chinese companies rarely adopt other， more mature means of investment.
As we all know， China’s economy is based on manufacturing and leads the world in exports of manufactured goods. This vantage is however not refl ected in the composition of China’s overseas FDI. At the end of 2011， the top six industries of China’s overseas direct investment stock were rental and commercial services （33.5 percent）， the financial sector （15.9 percent）， mining （15.8 percent）， wholesale and retail（11.6 percent）， manufacturing （6.3 percent）， transportation， storage， and postal services （5.9 percent）. As there are only a handful of homegrown transnational manufacturing companies， they are not yet a force to be reckoned with.
Finally， China’s transnational companies need to further improve their competitiveness and better fulfill social responsibilities. The situation in a host country is often quite different from that in which these enterprises were cultivated. In China， companies have had to deal with governmental management， planning and supervision， but think little of the interests of communities， NGOs， workers’ unions and multiple political parties. For overseas investors， the fi rst hurdle comes from understanding local politics and culture. In addition to learning about and complying with local laws and regulations， they also have to balance long-， mediumand short-term interests in a new environment， fulfi ll social responsibilities， and work towards mutual development with local enterprises.
The Chinese government is signing bilateral investment protection agreements with more and more countries in order to avoid double taxation and guarantee bilateral interests and those of enterprises and their staff. In the coming years， China is expected to make better use of both incoming and outgoing FDI， expanding its investment beyond borders， and encouraging more companies to invest abroad.