There have been a number of reports in the last several months about the fact that 2012 will be a record year for China's Overseas Direct Investment. Per Zhang Yansheng, secretary-general of the Academic Committee of China's National Development and Reform Commission, China's overseas direct investment (ODI) has grown at a rate of 40+% annually between 2006 and 2010. Here are some of the main points that Xinhua News agency summarized from recent Chinese Government directives:
| Overseas investment from Chinese companies will see "explosive growth" over the next decade, as the government has reaffirmed a strategy to encourage enterprises to invest overseas, experts said. |
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The strategy to grow ODI was reiterated in the country's official 12th Five-year Plan (2011-2015), which was endorsed by China's top legislature in March 2011.
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| In Q1'2012 China invested $16.55B overseas (as non-financial investments) with $6.2B being M&A activities per report from China's Ministry of Commerce; The Q1'12 results represented a growth of 95% in comparison to Q1'2011; |
At the same time there are reports showing that the ODI is not all smooth sailing for the Chinese investors. Per report published by People's Daily, "By the end of last year, China suffered a net loss of $26.8 billion in overseas investments," said Zhou Zhongshu, vice president of the China International Council for the Promotion of Multinational Corporations, at a Beijing conference in late June 2012.
One example of this is the investment Geely Automotive made in Manganese Bronze – the manufacturer of London's well known taxi cab vehicles…..Now you can see those on the streets of Beijing…Here is one (courtesy of Shanghai List)
Now, the key question is "Why the strong growth of investments?" In my view this is very heavily driven by the strategy of the Chinese companies and Chinese Government to build up its Intellectual Property (IP) portfolio – no better way to do so. The ODI and M&A activites are adding significant access for the Chinese entities to both European market and IP rights which in the future will provide nice platform for expansion into the global market.
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