Chinese companies urged to protect interests as ODI slows

China’s outbound direct investment (ODI) is forecast to grow slowly with minor fluctuations during the next couple of years, and it’s crucial for domestic companies to protect their interests as developed nations screen incoming investment more closely, analysts told a report launch event on Thursday.

In terms of investment risk, Germany retained its AAA ranking, holding the top spot on the list. Iraq, Venezuela and Sudan were three Branked countries holding the highest level of risks for Chinese investment, according to a country-risk rating of overseas investment released by the Chinese Academy of Social Sciences (CASS) on Thursday.

Surveyed countries and regions along the routes of the Belt and Road initiative (BRI) pose higher-thanaverage investment risks mainly due to their economic fundamentals and political risks, but good relations with China will help reduce such risks, said the report.

The US was the only developed country whose ranking had a major change compared with last year, with its ranking falling from AA to A. It fell 10 spots to No.14 this year, mainly due to its low score for relations with China, which are being influenced by such factors as the China-US trade war and tightened US reviews of Chinese investment.

The policies of US President Donald Trump’s administration have led to rising disputes within American society, which dragged down the country’s performance in terms of social elasticity, the report said.

The report used five major indexes (economic fundamentals, ability to pay debt, social elasticity, political risks and relations with China) plus 41 sub-indexes.

It covered 57 countries and regions where China invested in 2017, which accounted for 86 percent of China’s ODI. Samples were mainly chosen from among the G20 countries and those where China has made huge investments.

Figures for China’s ODI in the US have not been officially released, but analysts believe the value slumped.

Zhang Ming, director of the Department of International Investment with the CASS, told the Global Times on the sidelines of the launch event that the outlook isn’t optimistic for China’s ODI and acquisitions in the US this year. The bilateral trade dispute will not be resolved immediately and the US agency that reviews deals involving foreign companies – the Committee on Foreign Investment in the US (CFIUS) – has gained more power under US law.

“For the next few years, China’s overall ODI growth will likely fluctuate in the single-digit range,” Zhang noted.