China Goes Global

Martyn Davies

China Going Global

By 2014, China’s outbound foreign direct investment stock reached US$870 billion, up from US$28 billion in 2000.

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The Chinese government has been encouraging its state-owned enterprises to invest abroad since 2002. Initially Beijing wanted to create so-called national champions – globally competitive firms that could also act as policy vehicles. These companies focused on gaining access to natural resources and gaining political traction in peripheral markets, most notably in Africa, that had been largely shunned by traditional investors from Europe and the US.

Wide-ranging policy liberalisation and adjustments to its growth model will turn China into a driving force in global cross-border investment in the coming decade.

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But this approach is changing. Wide-ranging policy liberalisation and adjustments to its growth model will turn China into a driving force in global cross-border investment in the coming decade. China’s overseas investment has now become more diverse than just natural resources. Chinese companies now operate higher up the value chain, and as they seek to enhance their managerial abilities and become more competitive their focus has shifted to technology, consumer brands and professional services, often in the developed world.

China has adopted an ambitious approach to foreign direct investment which is effectively a long-term strategic effort to reshape the global financial architecture.

Over the past year, China has adopted an ambitious approach to foreign direct investment which is effectively a long-term strategic effort to reshape the global financial architecture. The “One Belt, One Road” initiative is a scheme to boost development along ancient land and maritime trading routes between China and Europe, by developing key infrastructure. The plan is backed by two new China-led institutions – the New Development Bank (or BRICS Bank) and the Asian Infrastructure Investment Bank – as well as the US$40 billion Silk Road Fund. As China extends its investment footprint, its geo-economic influence should follow.

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