Chinese Investment Abroad

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In recent years, China has successfully changed from a capital importing country into a capital exporting country. With the enhancement of comprehensive strength, China has tirelessly continued to develop the overseas market. Since 2003, investment abroad has continually grown for thirteen years. The annual average growth rate is over 30 percent. 

At the end of 2014, foreign direct investment (FDI) stock was at US$0.88264 trillion, which is amongst the top ten of the world. Up to 2014, around 18,500 Chinese investment companies have invested almost 30,000 FDI enterprises.

The most notable is the American market. In 2014, Chinese companies purchased over 100 companies in America, and in 2015, that rose to 142. Based on the consideration of various factors, the American government has started to strengthen the control of Chinese investment. In January of this year, the Committee on Foreign Investment in the US (CFIUS) rejected the plan in which Philips decided to sell its lighting business to a Chinese company, and in February, the Tsinghua Unigroup had cancelled a deal of investing in Western Digital after receiving a notice of inquiry from CFIUS prior. The American government is keeping the high-tech industry under particularly strict control, when compared to traditional manufacturing industries.

According to data analysis, the rate of Chinese non State-Owned Enterprises investing in America is increasing. Chinese enterprises invest mostly into the service industry. This year however, and for different reasons, among them government control, the speed of Chinese enterprises investing in America has slowed.

Nevertheless, the American market is not the only destination for Chinese investors. On account of the weakness in the European market, Chinese investors have become much more keen on that side of the Atlantic. In 2015, Chinese investors poured into Europe over US$23 billion, which much exceeds the amount of investment that went into the American market.

Compared to investments in the USA, the proportion of State-Owned Enterprise investments in the European market is much larger, with the main investment industries being infrastructure, construction and transportation, with the four major European countries of Italy, France, the United Kingdom and Germany receiving the lion’s share of the pie.

A Year in Chinese Acquisition
ChemChina invested EUR 7.1 billion to acquire Pirelli and Lenovo purchased Germany Medion AG in 2015. This year, Sino-Europe Sports has purchased Italy AC Milan, in the process spending EUR 0.72 billion. Meanwhile, the acquisition of the German KUKA Aktiengesellschaft by China’s Midea Group is ongoing and Desaiye, a famous French lace maker has recently been bought by the HangzhouYongsheng Group.

With global competition and China’s capital accumulation, besides, the “One Belt, One Road” plan that helps increase confidence to invest abroad, as a result Chinese investment abroad is irresistible on both sides. As an acronym, “One Belt One Road” refers to the “Silk Road Economic Belt” and the “21st Century Maritime Silk Road”, consisting of the Silk Road by Land and the Silk Road by Sea, which were used respectively by Marco Polo as his return route to Italy and by Zheng He during his voyages along the oldest known maritime route.

Nevertheless, it should always be kept in mind that overseas investment is supervised by the Chinese government, which means those intending to invest abroad must first receive approval from the Ministry of Commerce. In cases where the investment industry involves sensitive countries, regions or a sensitive industry; such as country with conflict, basic telecommunication trade, news media, cross-border water resource development and utilization, it shall be put on record that it is not a foresaid situation. With the Chinese government actively encouraging overseas investment in recent years, it has become a golden opportunity not to be missed.

Disclaimer
This article is intended solely for informational purposes and does not constitute legal advice. Although the information in this article was obtained from reliable official sources, no guarantee is made with regard to its accuracy and completeness. For more information please visit dandreapartners.com or WeChat: dandreapartners.

 

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Legal columnist Carlo D’Andrea is Chair of the Legal & Competition Working group of the European Union Chamber of Commerce in China; Shanghai Chapter, Coordinator of the Nanjing Working Group of the Italian Chamber of Commerce in China and has taught Chinese law (commercial and contractual) at Rome 3 University. 法律作家代开乐担任中国欧盟商会上海分会法律与竞争工作组主席,中国意大利商会劳动集团的协调员与曾经在罗马三大担任企业咨询课程中中国商法、合同法的课程教授。

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