Does China dominate global investment?

Originally Posted at  Center for Strategic and International Studies

Overseas investment offers China an opportunity to not just bolster its own economy, but also to leverage its economic strength to increase its influence abroad. Driven in part by Beijing’s “Going Global” strategy that encourages investment in foreign markets, Chinese firms have actively expanded their overseas footprint in recent years and explored investment opportunities in a range of sectors. Natural resource-extraction activities in Africa, Australia, Canada, and Latin America continue to dominate Chinese FDI, but Chinese companies have also begun acquiring strategic assets in American and European high-tech sectors. While these targeted investments may spur domestic innovation and help Chinese industries climb up the global value chain, China’s foreign investment stocks remain relatively small compared to the advanced economies of Europe and North America. Should China’s leaders manage to successfully re-balance the Chinese economy toward a consumer-driven and high-end manufacturing model, China may very well emerge as a world leader in international investment.

Calculations in the subsequent sections are derived from data provided by the American Enterprise Institute and Heritage Foundation’s China Global Investment Tracker (CGIT), which monitors China’s construction activities and global investments valued at least $100 million.


Annual Chinese FDI into Latin America and the Caribbean (LAC) was valued at less than $5 billion prior to 2010, but it has expanded dramatically over the last several years. Investment outflows totaled $81.55 billion between 2005 and 2015, growing steadily from just $430 million in 2006 to $4.87 billion in 2009 and peaking at $24.48 billion in 2010.  LAC accounted for only 10.5 percent of China’s total global FDI outflows over the past decade, and China’s investment in the region pales in comparison to other actors. According to the Economic Commission for Latin America and the Caribbean (ECLAC), Chinese investment in the region constitutes a mere 1 percent of total inflows from all investor countries. The Netherlands and the United States are the largest regional investors, accounting in 2014 for 20 percent ($31.8 billion) and 17 percent ($27.3 billion) of global investment.

Abundant natural resources make LAC a highly desirable investment destination for China, resulting in 55 percent ($45.79 billion) of Chinese investment in LAC over the past decade flowing into the energy sector. After totaling $1.85 billion between 2005 and 2009, Chinese energy investment into South America surged to $18.97 billion in 2010. Fifty-seven percent ($13.89 billion) of this surge flowed into Brazil, with acquisitions such as Sinopec’s $7.1 billion stake purchase of Repsol’s Brazilian arm constituting a significant portion of this inflow.

Chinese firms made two other high-value deals involving the Brazilian energy sector within the past six years.  Sinopec purchased $4.8 billion in Brazilian assets from Portugal’s Galp Energeia in November of 2011, and China Three Gorges Corporation made a $3.6 billion winning bid for two Brazilian hydropower plants in December 2015. In contrast, China’s slowing economy drove down domestic demand for foreign commodities, causing investment in the South American energy sector to drop from $18.97 billion in 2010 to $5.13 billion in 2011. Since 2011, such investment has remained below $6.5 billion annually.

While Chinese investment in the region is primarily focused on resource extraction, Chinese companies are exploring other sectors.  Chinese auto companies such as Chery and JAC Motors have invested in countries including Brazil, Argentina, Colombia since 2011 in order to bolster market access. Chinese electronics company ZTE Corporation announced a $200 million investment in a research and development facility in Brazil in 2011 to take advantage of the country’s favorable tax environment and time-to-market conditions. China may also become a key partner for the sustainable development of the region, as theChina-Latin American and Caribbean Countries Cooperation Plan (2015-2019) commits China and LAC to mutual investments in a wide range of sectors and the reciprocal transfer of technology and knowledge.

In addition to investments, construction contracts provide further insight into China’s involvement in LAC. Venezuela, Argentina, and Ecuador received the most high-value construction contracts over the past decade, taking in $14.02 billion, $11.48 billion, and $6.02 billion, respectively. China has signed contracts to build hydroelectric power plants in all three countries, inked deals on a variety of transportation and agriculture projects with Venezuelan and Argentinian companies, and recently become involved in real estate construction transactions in Ecuador. On the whole, LAC construction contracts have increased in frequency, funding, and diversity since 2010. Notwithstanding this diversification, 72 percent of all construction contracts in LAC since 2010 have been in the energy sector, with Venezuela leading the way with $12.27 billion (30 percent of all LAC energy contracts since 2010).

In addition to investment from Chinese firms, Chinese banks have provided loans toward LAC infrastructure. The two primary Chinese lenders to LAC – China Development Bank and The Export-Import (Exim) Bank of China – have issued 68 loansamounting to $124.7 billion since 2005 for traditional and renewable energy, transportation, and infrastructure projects.  In 2010, China’s loan commitments of $37 billion in the region surpassed those of the World Bank, Inter-American Development Bank, and the United States Export-Import Bank combined. In 2012, Chinese lending to the region dipped to $6.8 billion, which can be attributed to economic and political instability in Venezuela, one of China’s biggest development partners. However, Chinese loans steadily picked up the pace shortly thereafter, as banks loaned countries in the region $14 billion in 2013 and $29.1 billion in 2015.


Chinese investment in Africa varied considerably from 2005 to 2015. There was a small downturn in 2009 and 2010, likely a result of the global financial crisis, and a considerable spike to $22.4 billion in 2013. During this ten-year span, Western Africa received 34 percent of Chinese investment ($26.02 billion), followed by Eastern Africa with 24 percent ($18.97 billion).

In 2014, China was the fourth largest investor in Africa, making up 6.1 percent of global investment inflows behind France (18.3 percent), Greece (10 percent), and the United States (9 percent). Although China’s stock in Africa lags behind other countries, its investment share may expand considerably over the next several years. Notably, global investment flows into Africa fell seven percent from 2014 to $54 billion in 2015. Middle Africa was particularly affected by this shift, seeing a 36 percent year-on-year drop in investment inflows. However, Chinese investment into Middle Africa nearly doubled from $350 billion in 2014 to $630 billion in 2015. Chinese investment also rose in Eastern Africa, but declined in Southern and Western Africa.

The IMF classifies 20 African states as resource-rich, with energy and mineral resources comprising large portions of their respective exports. Unsurprisingly, Chinese investment in Africa is highly motivated by resource extraction. Of the total $77.47 billion China invested in Africa between 2005 and 2015, 42 percent ($32.63 billion) was invested in metals and 35 percent ($27.31 billion) into energy.  South Africa, Nigeria, Guinea, the Democratic Republic of Congo (DRC), and Egypt were the five largest recipients of Chinese investment, making up 46.5 percent ($36.01 billion) of China’s total regional investment. Natural resource contracts made up four out of the five largest investment deals — $6 billion for a Guinean alumina refinery by China Power Investment Corporation, $4.9 and $4.21 billion deals in Niger and Mozambique in 2008 and 2013 by CNPC, respectively, and a $3.1 billion deal in Egypt in 2013 signed by Sinopec. In some areas, China’s FDI affords it considerable market leverage. China’s national oil companies are the largest investors in South Sudan’s oil industry, and the country’s petroleum minister Mohamed Zayed Awad remarked in August 2016 that Chinese companies constitute 75 percent of FDI in the country’s oil sector.

Despite the magnitude of China’s investment in Africa, it still trails behind other countries. As detailed in the 2015 World Investment Report, China invested a total of $6.42 billion in Greenfield projects from 2013 to 2014, while the United States and France led all Greenfield investments over that period with inputs of $21 billion and $10.57 billion, respectively. China’s Greenfield investments also suggest that Chinese firms are diversifying their interests in Africa, as there has been a marked increase in manufacturing projects.  Chinese construction contracts show a similar trend. In recent years, the number of private investment projects in Africa registered with the Chinese government climbed from 52 in 2005 to 923 in 2012, which has promoted greaterdiversification in Chinese investment.

Development assistance is also critical to furthering China’s interests in Africa. A considerable portion of Exim Bank’s operations entail the financing of Chinese projects in Africa. Throughout the 2000s, the estimated $67.2 billion that Exim Bank loaned to Africa exceeded total World Bank loans by $12.5 billion. Angola, Ethiopia, Nigeria, and Sudan have consistently received Exim loans for infrastructure projects since 1994.

Some Chinese investments are partially funded through infrastructure-for-loan arrangements.  In these transactions, Chinese companies offer loans for resource-development projects to prospective African partners in exchange for repayment in the form of resources.  Sinopec signed a deal in 2005 to provide a $2 billion loan (China added $1 billion in 2006) to Angola in exchange for oil at pre-determined prices, and other Chinese companies plan to pursue similar financing schemes with Ethiopia, Eritrea, and Tanzania for sugar cane, gold, and iron ore. Read more…


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