China Tells Domestic Companies Go Make Overseas Acquisitions

Copyright Feng Li

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China Tells Domestic Companies -- Go Make Overseas Acquisitions

China has been actively acquiring foreign assets, particularly energy and resources, to power its economy, with firms encouraged to "go out" and make overseas acquisitions to gain market access and international experience. Officials have said overseas direct investment (ODI) could exceed FDI this year.

BEIJING -- China's outbound investment more than doubled in August to $12.62 billion, data showed Tuesday, far outstripping foreign direct investment (FDI) into the country, which fell to a four-year low.

China has been actively acquiring foreign assets, particularly energy and resources, to power its economy, with firms encouraged to "go out" and make overseas acquisitions to gain market access and international experience. Officials have said overseas direct investment (ODI) could exceed FDI this year.

The 112.1% year-on-year increase in ODI announced by the commerce ministry was a dramatic contrast to the 14% fall in FDI, which sank to $7.20 billion. Both sets of figures exclude investment in financial sectors.

FDI was also less than July's $7.81 billion and was the lowest since July 2010, when it stood at $6.92 billion. Commerce ministry spokesman Shen Danyang denied any link to Beijing's multiple probes into foreign companies.

Chinese authorities have in recent months launched anti-monopoly, pricing and other inquiries into scores of foreign firms in sectors ranging from auto manufacturing and pharmaceuticals to baby milk. The investigations have raised concerns among investors that Beijing is targeting overseas companies. But Shen denied any connection between the investigations and the fall in FDI. "They are not related," he said, declining to comment further.

But he added that China plans to revise three laws governing overseas companies and Sino-foreign joint ventures.

"By revising the laws, we hope to... create a more stable, transparent and predictable legal environment for foreign investment in China," he said.

Hans Dietmar Schweisgut, the new European Ambassador to China, said that he doubted whether it made sense to "judge this on the basis of one or two cases."

But he added that it is not in China's interests to "single out foreign companies and scare them away."

"Quite honestly, I think when you look at the policy objectives and the need to bring about ... a more balanced economy, it will not really make much sense to scare away foreign investors and foreign economic actors, which I think can make important contribution to achieving this change," he said.

Where is Investment Going?

For the first eight months of the year, China's ODI was up 15.3% at $65.17 billion.

In that period, investment into the EU soared 257.1%, leaped 116.7% into Japan, and increased 73.3% into Russia, the ministry said without giving totals.

It climbed 16% into the U.S., reaching $3.26 billion.

Ministry officials were unable to explain immediately the huge monthly increase.

Also in the first eight months, FDI was down 1.8% year-on-year at $78.34 billion.

It slumped 43.3% from Japan -- which is embroiled in territorial and historic rows with Beijing -- to $3.16 billion, fell 17.9% from the EU to $4.20 billion, and dropped 16.9% from the U.S. to $2.08 billion.

But from South Korea -- which has been enjoying closer diplomatic ties with China -- it climbed 31.3% to $3.02 billion, and from Britain it rose 18.9% to $850 million.

China's economy expanded 7.7% in 2013, the same as 2012 -- the worst pace since 7.6% in 1999.

Beijing's official growth target for this year is 7.5%, also the same as in 2013, while gross domestic product grew 7.4% in the first half of this year.

Copyright Agence France-Presse, 2014

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