China’s ongoing slowdown, along with policy changes, has impacted its investment outflows. In 2017, Chinese authorities issued new ODI regulations to arrest the yuan’s slide and stem capital flights.
Restrictions were imposed on investment in real estate and hotels, film and entertainment and sports, among others. Policy was supportive of industries promoting the BRI initiative, technology, and R&D as well as oil, mining, and agricultural activities.
Key to growth
China wants to augment its technology capability and develop long-term 5G plans, as well as capabilities in artificial intelligence, cybersecurity, financial technology, biotechnology, semiconductors, surveillance and space technology.
Outward investment in this sector slumped post-2016. All major (above $US2 billion) investment occurred in 2016.
China’s tremendous jump in renewable energy ODI has been driven by the crowded and competitive domestic market as well as a bid to support related exports.
China is a prominent player across various segments of energy production: power transmission, electricity generation and manufacturing. In 2019 though, in terms of volume, most of the investment was in equipment manufacturing.
China’s urban population has been rising (gaining 12 percentage points in a decade to 60 per cent in 2019). Meanwhile, agricultural land has plateaued at around 57 million hectares while China remains a net food importer.
The upshot is achieving food security has become a critical goal for China. Besides investing extensively in agri-technology in Israel and Switzerland, China has moved to secure the supply chain of food items ranging from dairy to soybeans.
Increasing demographic pressure on existing land and intensifying environmental strains will drive future agricultural investment.
A combination of socio-political and economic risks in recipient economies, as well as over-leveraged positions or misconduct by Chinese firms, has hampered China’s overseas investment projects in recent years.
A spotlight will fall on China’s involvement in the ASEAN region in coming years. Amid trade tensions, China is hastening the set-up of an export base in ASEAN, which has become China’s largest trading partner in the first half of 2020. In 2019, ASEAN received about 20 per cent of China’s ODI flows.
The conclusion of Regional Comprehensive Economic Partnership negotiations in 2020 will further boost regional co-operation.