China s Outbound Investment: Policies and Experiences

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1 China s Outbound Investment: Policies and Experiences By Fang Jin Development Research Center of the State Council July 25, 2008 Santiago, Chile Main Contents Facts and Features of China s outbound investment China s Policy Regarding Outbound Investment China s Experiences in Outbound Investment China s Outbound Investment and Latin America

2 Facts and features of China s outbound investment China is fast becoming an important source for outbound investment. China s total FDI outflow in 2006 was US$21.2 billion, ranked 13th in the world. By the end of 2006, Chinese companies had established nearly 10,000 overseas subsidiaries in 172 countries (regions). The accumulated outbound FDI stock stood at US$ 90.6 billion. Geographical Distribution of China s (Non-Finance) Outbound Investment in 2006 Unit: By Flow By Stock Millions US$ Value Share Value Share Total % % Asia % % Latin America % % Europe % % Africa % % North America % % Oceania % %

3 Top Ten Destinations of China s (Non-Finance) Outbound Investment in 2006 Unit: By Flow Unit: By Stock Millions US$ Value Share Millions US$ Value Share Total % Total % Cayman Is % Hong Kong % Hong Kong % Cayman Is % British Virgin Is % British Virgin Is % Russia % United States % United States % Korea Rep % Singapore % Russia % Saudi Arabia % Australia % Algeria % Macao % Australia % Sudan % Zambia % Germany % Distribution of China s Outbound Investment by Industry in 2006 Unit: Flow Stock Millions US$ Value Share Value Share Total % % Mining % % Leasing & business service % % Finance % % Transport, warehousing & postal service % % Wholesale and retailing % % Manufacturing % % Real estate % % Science research, service & geo-survey % % Agriculture, forestry, husbandry, fishery % % Power and other utilities % % Residential service & other services % % IT % %

4 Reasons for Investing Overseas Reasons for Investing Overseas % of Companies Surveyed Increasing Market Share 25.4 Learning or Introducing Advanced Foreign Technology 11.2 Acquiring Information 10.8 Acquiring Advanced Foreign Technology 10.3 Diversifying Operating Risks 8.9 Purchase Local Raw Materials and Export to China 7.8 Local R&D 6.9 Lowering Cost of Raw Materials 6.8 Others 6.7 China s Policy Regarding Outbound Investment The Go Out Strategy Approval Policy for Outbound Investment Supporting Policy for Outbound Investment

5 Supporting Policy for Outbound Investment Direct government subsidy Co-investment from Investment Fund Other subsidies and financial assistance Investment Facilitation Measures China s Experiences in Outbound Investment Successes and Accomplishments Problems and Obstacles

6 Successes and Accomplishments Setting up distribution channels and gaining access to overseas market Obtaining rights to explore natural resources in other countries Enhancing Chinese companies innovative capacity Cultivating Chinese multinational companies and increasing their competitiveness Improving relations with host countries Problems and Obstacles Complicated and time consuming approval process Lack of qualified personnel Lack of information and understanding about foreign market

7 China s Outbound Investment and Latin America China s Investment in Latin America Potential for future growth Suggestions for increasing China s investment in Latin America China s Bilateral Trade Volume and Non-financial FDI Stock in Selected Latin American Countries in 2006 (Unit: Million US$) Total Trade Share FDI Stock Share World % % Latin America ex. Cayman and BVI % % Brazil % % Peru % % Mexico % % Venezuela % % Cuba % % Ecuador % % Bolivia % % Argentina % % Chile % %

8 China s Recommended Areas for Investment in Selected Latin American Countries Country Agriculture Mining Manufacturing Services Brazil Forestry Oil, Iron ore & Bauxite, Copper Peru Livestock feeding, Crop growing Iron, Copper, Lead & zinc Electrical Equipment & Appliances, Electronic equipment, Metal Products, Plastic Products Textile, Agricultural Machinery, Metal products Mexico Crop growing Textile and apparel, Electronic equipment Venezuela Crop growing Oil & Natural Gas Food products, Textile and apparel, Electronic equipment, Electrical Equipment & Appliances, Agricultural Machinery Trade & distribution, Transportation, Construction, Electricity production & supply Trade & distribution Oil services Infrastructure China s Recommended Areas for Investment in Selected Latin American Countries Country Agriculture Mining Manufacturing Services Cuba Rice Growing Oil, Zinc Food products, Textile and apparel, Electronic equipment Telecom, Tourism Ecuador Bolivia Argentina Flower growing Livestock feeding, Grain growing Oil & Natural Gas Oil & Natural Gas, Iron, Copper, Lead &zinc Textile and apparel, Food processing Wood processing, Leather products Gardening Equipment, Electrical Equipment & Appliances, Transportation equipment & parts, Food processing, Agricultural machinery Chile Fishery Copper Electrical Equipment & Appliances, Food processing machinery, Toy products, Food products Construction Electricity production & supply Trade & distribution

9 Potential for future growth China s growing need and capacity for outbound investment Greater investment opportunities in developing countries including Latin America The fast improving economic and trade relations between China and Latin America Suggestions for increasing China s investment in Latin America Expand FTAs and Bilateral Investment Treaties (BITs) Go beyond traditional channels of FDI Assist small and medium sized enterprises (SMEs) Investment facilitation measures

10 The End Thank You!

THE IMPACTS OF CHINESE GROWTH ON LATIN AMERICA. Professor Rhys Jenkins University of East Anglia Norwich, UK

THE IMPACTS OF CHINESE GROWTH ON LATIN AMERICA Professor Rhys Jenkins University of East Anglia Norwich, UK $ million The Growth of Latin America-China Economic Relations Exports to China 90000 80000 70000