China's investment on target to balance out 'in 5 years'

China's investment on target to balance out 'in 5 years'

CHINA - China's international investment may match global investment here in five years, Commerce Minister Chen Deming said on Wednesday.

China's outbound direct investment this year will pass last year's to hit US$70 billion (S$85.95 billion) and is set to increase in 2013, Chen said at a financial forum in Beijing.

"Maybe in the next five to 10 years, China's outbound investment and investment by international capital in China will balance," Chen said.

China's non-financial ODI was US$58.1 billion in the 10 months to October, up 26 per cent on the same period last year, according to the minister.

Foreign investment in China amounted to US$91.7 billion for the same time frame.

While this marked a 3.5 per cent year-on-year drop, the top spot as the leading FDI destination had already been claimed from the United States.

"An increase in overseas investment by Chinese companies is an inevitable trend," Chen said.

"With foreign reserves of US$3 trillion in hand, we will not sit back and watch the assets depreciate with the third round of quantitative easing. We must inject it into the real economy and make our contribution to global prosperity," he said.

Huo Jianguo, president of the Chinese Academy of International Trade and Economic Cooperation, a think tank affiliated with the Ministry of Commerce, was even more optimistic, saying that it will probably take three years, or "five years at most," for outbound direct investment to match inbound.

"FDI in China is likely to grow in 2013 as the government further opens up the scope for investment, such as the services sector, and improves the investment environment. But growth will be slower than 10 per cent owing to constrained transnational investments."

Cross-border investment is estimated to reach US$1.6 trillion globally this year, 25 per cent lower than the record of US$2.5 trillion in 2007.

Surging ODI (from China) is driven by domestic enterprises expanding globally.

And the lingering debt crisis in developed economies creates great opportunities for China's overseas mergers and acquisitions.

"But it's important not to forget about risk control in overseas investment, and about quality and efficiency," he said.

Examples include Sany Heavy industry, whose wind farm was axed in the US, and China National Offshore Oil Corp, whose purchase plans for Nexen in Canada ground to a halt.

Chong Quan, deputy representative for China's international trade talks, said on Monday "an increase in disputes was a result of complexity in the overseas environment, and the 'coloured glasses' some destination countries wear when judging Chinese companies."

Tim Cullen, partner with Jones Day, a US law firm that specializes in global trade disputes, said these cases were controversial even in the US, but there will be "less political noise" after the election.

Meanwhile, he suggested Chinese companies take into greater account legal aspects during their globalisation process.

Chen also suggested that Chinese companies should not rush into large-scale projects without a sufficient knowledge of corporate culture.

"A good method might be to start as a shareholder, and gradually expand your share."

He Zhenwei, deputy secretary-general of China Industrial Overseas Development & Planning Association, stressed the role of private investors in driving such growth, citing that the number of merge-and-acquisition deals by private companies has overtaken those by State-owned companies for the first time.

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