BOFIT Viikkokatsaus / BOFIT Weekly 2017/07

China's official figures show outward foreign direct investment flow (excluding financial sector investments) last year amounted to $170 billion, an increase of 40 % from 2015. While final FDI numbers for the financial sector have yet to come in, they typically represent 10–20 % of total FDI. Thus, the total value of FDI outflows from China last year was probably around $200 billion. The value of FDI inflows to China, on the other hand, fell last year to $126 billion. Outbound FDI of Chinese firms also exceeded inbound FDI in 2015.

Official Chinese figures fail to give a complete picture of where investment ultimately ends up. The statistics don't give a correct picture of the final-destination countries or even branches. Alternative estimates confirm the rise in FDI, however. For example, the Rhodium Group estimates that Chinese FDI flow increased by about 40 % last year to some $200 billion. China Global Investment Tracker (CGIT), which monitors large foreign investments of Chinese firms, reports that such FDI rose 46 % last year to $169 billion.

Chinese investments in Europe have risen particularly fast. The Rhodium Group reports that FDI flows from China to Europe reached €35 billion last year, a nearly 80 % increase from 2015. Two thirds of all FDI going to EU countries came from privately held Chinese firms. The flow of FDI from EU to China fell last year to around €8 billion. Also figures from the CGIT database show that FDI flows from China to EU countries grew about 80 % last year.

The largest direct investment by a Chinese firm in Europe last year (€6.7 billion) was made by Tencent to purchase a majority stake in the Finnish mobile video game company Supercell. According to Rhodium, the acquisition by itself was sufficient to make Finland the fifth-largest cumulative recipient of Chinese FDI in the EU. Large acquisitions in Europe last year included investments in advanced machinery (Midea's purchased a large stake in German robot-maker Kuka AG and ChemChina's acquisition of German industrial machinery-maker KraussMaffei), as well as companies in the fields of renewable energy and entertainment. Investment in real estate fell. ChemChina has also made a $43 billion offer for Swiss agribusiness giant Syngenta. The deal awaits clearance by competition officials in the EU and US.

The growth of outward FDI flows from China should slow this year as officials pay increased attention to "irrational" investments by state-owned enterprises. The government wants to attract FDI into China by opening new branches to foreign firms and allowing broader access to domestic financing. In January, the State Council published goals on allowing more access for foreign firms in branches such as the financial sector, manufacturing, the telecom sector, transport and education. No schedule or details on the reforms have yet been released. EU countries have repeatedly criticised China for limiting entry of foreign firms to certain branches.

Show weekly 2017/06 Show weekly 2017/08