ODI drop no threat to global in­vest­ing

China Daily (Hong Kong) - - FRONT PAGE - By ZHONG NAN zhongnan@chi­nadaily.com.cn

China’s out­bound di­rect in­vest­ment dropped pre­cip­i­tously in Jan­uary in off­shore prop­erty de­vel­op­ment and in cul­tural, sports and en­ter­tain­ment busi­nesses, the Min­istry of Com­merce said on Thurs­day.

The coun­try’s ODI in the two cat­e­gories plunged 84 per­cent and 93 per­cent, re­spec­tively, in Jan­uary, min­istry fig­ures showed.

But the drops should not be seen as a re­ver­sal for the nation’s Go­ing Global strat­egy, ac­cord­ing to a min­istry of­fi­cial. They were due in part to sta­tis­ti­cal and sea­sonal fac­tors and a gov­ern­ment de­ci­sion to read­just the nation’s ODI di­rec­tion to fo­cus on the real econ­omy and emerg­ing in­dus­tries, ac­cord­ing to gov­ern­ment of­fi­cials and aca­demic ex­perts.

The coun­try’s over­all non­fi­nan­cial ODI slumped 35.7 per­cent year on year in Jan­uary to 53.27 bil­lion yuan ($7.73 bil­lion), which is the weak­est in 16 months, the min­istry said.

Sun Ji­wen, a min­istry spokesman, said the ODI dropped mainly be­cause China reached a high level of in­vest­ment in 2016 and be­cause of the sea­sonal ef­fects of an early Spring Fes­ti­val last month.

“Even though a de­clin­ing ODI fig­ure oc­curred in Jan­uary, the coun­try’s over­all in­vest­ment port­fo­lio is im­prov­ing,” Sun said. “The min­istry will sup­port au­then­tic, le­gal out­bound in­vest­ment by ca­pa­ble and qual­i­fied Chi­nese com­pa­nies.”

The Chi­nese gov­ern­ment had al­ready warned that some for­eign in­vest­ment op­por­tu­ni­ties in prop­erty de­vel­op­ment, ho­tels, sport clubs, film com­pa­nies and en­ter­tain­ment busi­ness could lead to ir­ra­tional in­vest­ment and even il­le­gal ac­tiv­i­ties, said Tu Xin­quan, a pro­fes­sor at the Univer­sity of In­ter­na­tional Busi­ness and Eco­nom­ics in Bei­jing.

“Some do­mes­tic com­pa­nies made over­seas ac­qui­si­tions in

th­ese sec­tors un­der heavy debt,” said Tu. “In­vest­ing in th­ese ser­vice-re­lated busi­nesses could also in­volve money laun­der­ing. The au­thor­ity there­fore has el­e­vated the re­view re­quire­ments to en­sure the deals are au­then­tic.”

In Novem­ber, gov­ern­ment branches in­clud­ing the Na­tional De­vel­op­ment and Re­form Com­mis­sion and the State Ad­min­is­tra­tion of For­eign Ex­change jointly an­nounced that they would sup­port “real and rea­son­able” merg­ers and ac­qui­si­tions in over­seas mar­kets.

Chi­nese in­vest­ment in global man­u­fac­tur­ing and in­for­ma­tion tech­nol­ogy saw yearon-year growth of 79.4 per­cent and 33.1 per­cent, re­spec­tively, in Jan­uary.

In­vest­ments in coun­tries along the Belt and Road Ini­tia­tive routes also have be­come part of the pic­ture, tak­ing up 10.6 per­cent of China’s to­tal ODI last month.

Sun said Chi­nese com­pa­nies tended to have more di­ver­si­fied for­eign in­vest­ment and fi­nanc­ing chan­nels in the United States and Europe. China’s two largest for­eign ac­qui­si­tions in Jan­uary were both com­pleted with fi­nanc­ing from over­seas, with a com­bined value of $8.38 bil­lion.

“As the winds of trade pro­tec­tion­ism blow hard, many de­vel­oped mar­kets, in­clud­ing the United States, Ger­many, Italy and France, have ei­ther set or pre­pared to set re­stric­tions on Chi­nese in­vest­ment,” said Zhu Feng, di­rec­tor of the In­sti­tute of In­ter­na­tional Stud­ies at Nan­jing Univer­sity.

Shao Kai­wen, deputy gen­eral man­ager of China Ship­build­ing In­dus­try Corp, one of the coun­try’s big­gest ship­builders by sales rev­enue, said the group cur­rently has no in­ten­tion to ac­quire for­eign com­pa­nies. The ex­change rate be­tween the ren­minbi and the US dol­lar is not fa­vor­able, he said, and there are other risks, like in­fla­tion, po­lit­i­cal fac­tors that may crop up this year from newly elected gov­ern­ments in Europe, and the pos­si­bil­ity of eco­nomic over­heat­ing.

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