Juwai IQI has reported a significant increase in the number of Chinese companies it is assisting with outbound investment projects.
Juwai IQI Co-Founder and Group Managing Director Daniel Ho said, “Due to our 20-country network, we are able to offer seamless, global service to our Chinese clients as they invest overseas and engage in international business. According to the investment type and location, we mobilise specialized teams with robust local expertise.
“In 2023, Chinese companies are looking overseas to invest now that the end of zero Covid makes transactions easier.
Chinese outbound investment up 18% Y-O-Y in Q1
“China’s outbound direct investment has jumped right from the beginning of 2023. Overall outward direct investment reached US$40.5 billion for the full first quarter. That’s 18% higher than a year earlier.
Investment grew most quickly in wholesale, retail, transportation, warehousing and postal services. Additional fast-growing sectors include investment from China’s $380 billion biotech industry and into Asia’s US$3.8 trillion ecommerce sector.
“The top five outbound destinations for Chinese corporate investment from 2018 to 2021 are Japan, the USA, the Republic of Korea, Switzerland and Germany.
“During the four years, Japan received a total of US$40.1 billion of investment from China, according to OECD data, substantially more than any other country.
“In the same period, the United States received US$24.2 billion of investment, and Korea received US$17.4 billion. Switzerland and Germany both received just over US$10 billion of investment.
“Smaller destinations are receiving a rapidly growing share of Chinese outbound investment. While the totals in these cases may not match the amounts invested in the world’s largest economies, they often are the largest inflows from any source to the destination countries in question.
China Overall Outbound Direct Investment (US$ billion)
Source: Juwai IQI, EY
“Thailand has been a favourite for Chinese investment for years. It offers the benefits of a central role in the ASEAN trade bloc, free trade access to China and India, and a sophisticated manufacturing base.
“In 2022, Chinese companies were Thailand’s largest source of investment and poured $2.3 billion of investment into the Kingdom, said the Thai Board of Investments.
End of zero COVID just one of the motivations for investment
“Some of the growth in Chinese outbound investment is _the expression of pent-up demand now that zero Covid has ended. Investment was held back for nearly three years while China’s borders were closed, which made cross-border transactions more difficult. Some of the 2023 investment flow represents catch-up activity now that the borders are again open.
“However, that is not the only driver. Another motivation is to move lower-skilled manufacturing offshore to cheaper markets, often in ASEAN, as China itself increasingly specialises in high-skilled, high-value work. China is transforming itself from the low-cost factory of the world to a globally competitive centre for advanced technology, innovation and sophisticated production of high value-added products.
“Third, Chinese companies are seeking to diversify their own supply chains to protect themselves from any risk of being affected by Western sanctions and import restrictions, which are generally directed at entities based in China.
“A fourth element of the wave of outbound investment involves established Chinese market leaders seeking to establish operations overseas, where they can better serve their local customers. For example, Chinese new energy car company BYD launched construction of its first automobile plant in Thailand earlier this year. The facility will be a production hub for its host country and nearby ASEAN and Asia Pacific countries, according to the company.
“In countries like Pakistan, Cambodia, Saudi Arabia, Singapore and Laos, some Chinese investment also seeks to develop the web of infrastructure planned under the Belt and Road Initiative (“BRI”). BRI financing and investments in 2022 were USD67.8 billion, nearly unchanged from the USD68.7 billion in 2021, according to the Green Finance & Development Center.
“Cambodia is a frequent investment destination for the Chinese businesses with which we work. In that country, projects planned or under way include a US$1.4 billion expressway, three airports that will cost nearly US$3 billion and a US$16 billion coastal entertainment hub in Sihanoukville. In addition, a US$4 billion high-speed rail line will link the Thai border, Phnom Pen Sihanoukville and the Vietnamese border.
“In part as a result of these projects and the new Cambodia-China FTA, bilateral trade between China and Cambodia climbed by 4.4% to $11.6 billion in 2022.
How Juwai IQI helps
“Cross-border investing involves new markets, regulations and competitive environments. Juwai IQI’s global reach and expertise provides Chinese companies with a powerful platform to assist investors. We can help them develop their go-out investment and business strategy, identify opportunities and negotiate transactions.
“Our team has facilitated outbound Chinese investment since 2011. Our track record, capabilities and established relationships in China and destination markets makes Juwai IQI the perfect partner.”
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