Chinese overseas investment patterns evolving

In contrast to years ago, more outbound investment is flowing into the manufacturing and IT industries, experts told a recent outbound investment forum.

From January to October, Chinese companies had a cumulative direct investment of $145.96 billion (137 billion euros; 115.3 billion) overseas, with year-on-year growth of 53.3 percent, according to the latest report provided by China's Ministry of Commerce.

According to a report released by the ministry, $17.59 billion of outbound investment was injected into the manufacturing industry in the first half-year of 2016, with year-on-year growth of 245.6 percent.

The change of focus comes from the maturing of China's economy, says Luo Xiaojun, co-founder of Morning Whistle, a merger and acquisition consultancy.

"In the early days, China focused more on investing resources to fulfill the needs of manufacturing," he says. "We simply produced and exported to the global market while the advanced technologies were still out there."

As China undergoes economic restructuring, Chinese manufacturers need to update technology and expand their markets. Chinese enterprises prefer to obtain advanced technology and a position in overseas markets through mergers and acquisitions rather than independent research and development, which is costly and time-consuming.

From January to September, Chinese enterprises spent $64.44 billion on mergers and acquisitions, $10 billion more than the total amount for last year, according to data provided by the Ministry of Commerce.

Manufacturing and information technology are the top two industries, with investment of $16.10 billion and $15.48 billion respectively.

Mergers and acquisitions can help companies to obtain technology, patents and talent, and to enter a new market within short time, Yu Weiping, vice-president of CRRC Corp, told the 3rd Conference of China Outbound Forum, held from Dec 2 to 3.

Through acquisition, domestic enterprises can also increase their influence by acquiring well-known brands to promote their products and services in both overseas and home markets.

"Overseas acquisition is a way we can narrow the gap between us and the developed countries," said Long Yongtu, former vice-minister of the Ministry of Foreign Trade and Economic Cooperation (now called the Ministry of Commerce), at the forum.

Private enterprises have done a better job in terms of acquisitions, say experts.

According to data from the Center for China Globalization, private enterprises made 290 mergers and acquisitions, accounting for 64 percent of all reported deals.

Relative independence gives private capital more flexibility to put its money where it is required.

Private enterprises' rapid decision-making allows them to act efficiently, says Qian Jiannong, vice-president of Fosun Group. He also pointed out that if they encounter problems they can change and reform quickly.

Unlike state-owned businesses, private ones can use overseas funds and capital to invest in acquisitions. When private enterprises become international companies, the way they use their funds is not restricted by local policies or rules, leaving more space for the companies to invest.

"I feel foreign companies and governments are willing to cooperate with our private enterprises," Qian says. "I believe there are great prospects for private enterprises in the international expansion process in the future."

liuxuan@chinadaily.com.cn