China about to become net investor

Outward flows likely to exceed FDI in country this year, UN report says

China's outward investment is likely to exceed foreign direct investment inflows this year, making the country a net investor, the United Nation's Conference on Trade and Development says.

This "inevitable trend" will have "great significance in reshaping the economic structure and long-term development" of the world's second-largest economy, it says.

Last year, China's foreign direct investment rose 2.3 percent year-on-year to $123.9 billion, ranking second after the United States, the UN's body's World Investment Report said on June 24.

"China remained the recipient of the second-largest flows in the world. Meanwhile, the quality of FDI inflows improved, with more into high-end manufacturing and services with high added value," said Zhan Xiaoning, director of the investment and enterprise division at UNCTAD.

"What's more, China's outward investment is more striking."

Last year, investment outflows from China increased 15 percent year-on-year to $101 billion, the third highest after the US and Japan, according to the report.

As China continues to deregulate outbound investment, outflows to both developed and developing countries are expected to grow further, it says.

Zhan says China's economic landscape, driven by exports and foreign investment in the past 30 years, will change significantly.

"Outward investment will serve as an important driver for industrial upgrading and economic growth," Zhang said.

Liang Guoyong, an economic affairs officer at UNCTAD said it is very hard to predict when China will become a net investor, but the trend is inevitable.

"The process will accelerate along with the nation's fast economic growth, the increase in Chinese companies' competitiveness and the amount of resources and market share they gain. The change will lead to a more effective allocation of financial resources for the Chinese economy, as the country holds the world's largest foreign exchange reserves."

Huo Jianguo, president of the Chinese Academy of International Trade and Economic Cooperation, a Ministry of Commerce think tank, says China's new role as a net investor will help ease trade frictions.

"The rapid increase in overseas investment by Chinese enterprises is very likely to transform the trade landscape, because profits from overseas will lessen the country's reliance on exports, reducing trade frictions and pressure from swelling foreign exchange reserves."

Contact the writers at lijiabao@chinadaily.com.cn and muchen@chinadaily.com.cn.

(China Daily Africa Weekly 06/27/2014 page23)