ODI faces risk from protectionism

Slack growth, commodity fluctuations also a problem: NDRC

Chinese outbound investment is facing a variety of risks including rising protectionism and slack economic growth in certain countries and regions, according to a report published by the National Development and Reform Commission (NDRC) on Thursday.

According to the report, external changes in the global investment environment, often in a negative way, are affecting China’s outbound investment. “Certain developed countries’ slack economic growth, certain developing countries’ vulnerable economic systems, and the large-scale fluctuations of global bulk commodities – these factors are all harmful for the sustainable development of Chinese companies’ outbound investment.” The report noted that the rising trend of protectionism in certain countries under the guise of “national security” concerns has also “affected the normal commercial investment of Chinese companies.”

One example is the US, which published a memo in October calling China a nonmarket economy. The US has also started an inquiry into alleged Chinese intellectual property abuses.

The NDRC also stressed that domestic companies’ global competence and counter-risk capabilities need to improve. “The blind optimism of some Chinese companies investing overseas has fueled misunderstandings in some countries,” the report noted.

Concerning the risks, the central government is taking measures to increase the safety management of Chinese companies’ overseas investment and is studying the regulations for domestic companies’ overseas business operations.

Chinese government departments will also strengthen communication with overseas embassies and overseas offices (of domestic institutions) to help support Chinese companies’ overseas rights.

China’s overseas investment has developed fast in recent years. In 2016, Chinese companies invested a total of about $1.36 trillion in foreign countries, compared with just $2.7 billion in 2002, data from the NDRC showed.

By the end of 2016, Chinese companies had made outbound investments in as many as 190 countries and regions in 18 industrial categories including healthcare, education, social services, retail and manufacturing.

China’s outbound investment has also been boosted by initiatives such as the Belt and Road.

According to the NDRC report, China has invested more than $50 billion in countries along the Belt and Road route, helping to develop nearly 2,000 projects in partnership with overseas enterprises.