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China’s Overseas Investments, Explained in 10 Graphics

China’s overseas finance is becoming increasingly influential globally. Between 2004 and 2013, China’s overseas investments increased 13.7 times, from $45 billion to $613 billion.1 Starting in 2010, two Chinese state-owned banks (China Development Bank (CDB) and the Export-Import Bank of China (China Exim)) lent more money annually to other developing countries than the World Bank. In 2014, China spearheaded the BRICS Development Bank, the Asia Infrastructure Investment Bank (AIIB) and the Silk Road Fund, symbolizing China’s growing influence in development finance.

This level of investment can provide needed sources of capital for developing countries in Africa, Asia and Latin America. As China plays a greater role in development finance, it can also embrace the opportunity to manage environmental and social risks associated with these investments.

Here is a look at the evolution of China’s overseas investment:

The Rise of Emerging Economies

In 1980, China, India, Brazil and South Africa had a combined GDP of $720 billion (5.5 percent of global GDP). As of 2013, they represented $14 trillion (19.1 percent of global GDP).

From Recipient to Investor: Foreign Direct Investment

Formerly the recipients of overseas investments, emerging economies like China, India and Brazil are now playing an increasingly important role as investors. In 2014, China’s overseas investments, known as outward foreign direct investments (OFDI), rose 14.1 percent to $102.9 billion, while China’s inward OFDI only rose 1.7 percent to $119.6 billion. At this rate, China’s outbound investments will overtake inward OFDI within the next two years.

Where Is China Sending its Investments?

As reported by China’s Ministry of Commerce (MOFCOM)2, China’s OFDI is largely concentrated in Asia (mainly in Hong Kong), although investment has increased significantly in Latin America and Africa over the past five years.

The Final Destinations of China’s OFDI

Despite the reported concentration of Chinese investments within Asia, official Chinese OFDI statistics may not fully reflect the final destinations of China’s OFDI. Like companies from many countries, some Chinese companies initially invest in tax havens or offshore financial centers where there is minimal or no tax, such as Hong Kong or the Cayman Islands3. Then, these companies reinvest this same money in other destinations, such as Africa and Latin America, through their subsidiaries in these offshore financial centers. Official Chinese OFDI only indicates the initial destination of investments. The graphic below illustrates China’s OFDI stock in each region, and also extracts potential flows to OFCs.

For example, many major mergers and acquisitions occur using money that initially flows through Hong Kong. In 2011, Sinopec, China’s biggest oil refiner, acquired 30 percent of Galp Energia (Brazil) for $5.2 billion through its Hong Kong subsidiary, Sinopec International Petroleum Exploration and Development Corporation (SIPC)4. This $5.2 billion would be recorded as OFDI in Hong Kong, rather than in Brazil.

Sectors Receiving Chinese Investments

By the end of 2012, 90 percent of China’s OFDI was invested in six sectors—leasing and business services (33 percent), finance (18 percent), mining (14 percent), wholesale and retail trade (13 percent), transportation and storage (6 percent) and manufacturing (6 percent)5. However, this may not reflect the whole story. Part of the investments made in leasing & business services (33 percent) were set up as investment and asset management subsidiaries in OFCs, so these investments could have been reinvested in other industries. Meanwhile, domestically, the majority of China’s loans were invested in the manufacturing sector, as China accounted for 22.4 percent of world manufacturing in 2012, the largest in the world6.

China Goes Global: Bank Lending

As part of China’s “Go Global” strategy to encourage Chinese companies to invest overseas, the government mobilized state-owned banks, largely China Exim and CDB, to facilitate out-going capital flows. These banks increasingly support Chinese companies’ overseas investments, as well as mergers and acquisitions of foreign companies. Chinese companies now obtain 80-90 percent of their funding from Chinese banks.

Regional Spotlight: China’s Presence in Africa

China’s OFDI in Africa is accelerating rapidly, increasing from $1 billion in 2004 to $24.5 billion in 20137.

A large amount of the investments went to extractive industries, such as mining and oil extraction.

China’s OFDI Stock in Africa

By the end of 2013, 4 percent of China’s OFDI stock, or $26.2 billion, was in Africa. By 2013, the top eight recipients accounted for 61 percent of China’s OFDI stock in Africa, with South Africa alone receiving 22 percent of China’s OFDI in Africa8.


  • LEARN MORE: WRI’s Sustainable Finance program continues to explore this issue. For more information, please see our slide deck about Chinese development finance.

Sources

  1. 2013 Annual reports from various MDBs, NDBs and ECAs.

  2. Chinese Finance and Banking Society. (2014). Almanac of China’s Finance and Banking 2013. Beijing, China: China’s Financial Publication House

  3. International Monetary Funds. (2014). World Economic Outlook Database October 2014 Edition [Data file]. Available from http://www.imf.org/external/pubs/ft/weo/2014/02/weodata/index.aspx

  4. Ministry of Commerce of the People’s Republic of China, National Bureau of Statistics of the People’s Republic of China, State Administration of Foreign Exchange. (2014). 2013 Statistical Bulletin of China’s Outward Foreign Direct Investment. Beijing, China: China Statistics Press.

  5. The World Bank Group. (2014). World Development Indicators [Data file]. Available from http://data.worldbank.org/indicator/

  6. United Nations Conference on Trade and Development. (2014). UNCTADstat. [Data file]. Available from http://unctadstat.unctad.org/wds/ReportFolders/reportFolders.aspx?sCS_ChosenLang=en


  1. Ministry of Commerce of the People’s Republic of China, National Bureau of Statistics of the People’s Republic of China, State Administration of Foreign Exchange. (2014). 2013 Statistical Bulletin of China’s Outward Foreign Direct Investment. Beijing, China: China Statistics Press. 

  2. Ministry of Commerce of the People’s Republic of China, National Bureau of Statistics of the People’s Republic of China, State Administration of Foreign Exchange. (2014). 2013 Statistical Bulletin of China’s Outward Foreign Direct Investment. Beijing, China: China Statistics Press. 

  3. Ministry of Commerce of the People’s Republic of China, National Bureau of Statistics of the People’s Republic of China, State Administration of Foreign Exchange. (2014). 2013 Statistical Bulletin of China’s Outward Foreign Direct Investment. Beijing, China: China Statistics Press. 

  4. Ministry of Commerce of the People’s Republic of China, National Bureau of Statistics of the People’s Republic of China, State Administration of Foreign Exchange. (2014). 2013 Statistical Bulletin of China’s Outward Foreign Direct Investment. Beijing, China: China Statistics Press. 

  5. Ministry of Commerce of the People’s Republic of China, National Bureau of Statistics of the People’s Republic of China, State Administration of Foreign Exchange. (2014). 2013 Statistical Bulletin of China’s Outward Foreign Direct Investment. Beijing, China: China Statistics Press. 

  6. Chinese Finance and Banking Society. (2014). Almanac of China’s Finance and Banking 2013. Beijing, China: China’s Financial Publication House 

  7. Ministry of Commerce of the People’s Republic of China, National Bureau of Statistics of the People’s Republic of China, State Administration of Foreign Exchange. (2014). 2013 Statistical Bulletin of China’s Outward Foreign Direct Investment. Beijing, China: China Statistics Press. 

  8. Ministry of Commerce of the People’s Republic of China, National Bureau of Statistics of the People’s Republic of China, State Administration of Foreign Exchange. (2014). 2013 Statistical Bulletin of China’s Outward Foreign Direct Investment. Beijing, China: China Statistics Press. 

Comments

China is the future of the world!

how i'm I gonna connect with investors and investment opportunities in africa

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