assertive systolic: China's Provincial Outbound Direct Investment in 2011

By Julia Gu

Apr. 6 ? China?s Minister of Commerce recently called for and chaired a special meeting where members not only discussed standard administrative methods and development plans for foreign trade, but Chinese outbound direct investment (ODI), as ODI has become a new, growing part of the economy.

According to the state news agency, People?s Daily, China aims to balance its ?go global? and ?opening up? initiatives by accelerating regional cooperation and economic development as well as overseas investment.

The Ministry of Commerce reports that China?s non-financial ODI grew 1.8 percent in 2011 to US$60.07 billion with direct investments from Chinese businesses in 3,391 enterprises across 132 countries and regions around the world.

China?s ODI through mergers and acquisitions (M&As) remained strong with US$22.2 billion, accounting for 37 percent of total ODI. M&A deals in Europe by Chinese investors surged 154 percent to US$10.4 billion from US$4.1 billion in the previous year.

Meanwhile, ODI from local provincial companies came in at US$20.3 billion, accounting for 33.4 percent of total non-financial ODI in the same period and representing an increase of 24.4 percent from 2010. Central China?s ODI in this sector grew 64.1 percent year-on-year, making the region the fastest growing area in outward investment, while investment from West China showed strong potential with a year-on-year increase of 42.9 percent. However, China?s major GDP engines in the Yangtze River Delta and Pearl River Delta ? including Zhejiang, Shandong, Jiangsu, Guangdong and Shanghai ? took the lead in outward investment.

We break down China?s US$20.3 billion in non-financial ODI from local areas on a province-by-province basis in the map and table below. However, it is important to note that these figures represent only direct investments made by large private enterprises and by local government-owned companies, and are not indicative of the country?s entire ODI levels. In particular, ODI from China?s major Beijing-controlled SOEs (such as Sinopec, State Grid, CNOOC) and the US$22.2 billion from M&As described above are not included in these graphics.

Dezan Shira & Associates is a boutique professional services firm providing foreign direct investment business advisory, tax, accounting, payroll and due diligence services for multinational clients in China, Hong Kong, India, Singapore and Vietnam. For further information, please visit the firm?s web site, E-mail china@dezshira.com, or download their brochure here.

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