Executives leading China’s state-owned and private companies are, for the most part, new to the foreign direct investment game, and are thus likely to be conservative in their initial investments. One would assume, therefore, that those executives are likely to invest in those countries where the Chinese government enjoys strong relationships, carries some influence, and perhaps the government is prepared to provide incentives to make that investment.
Yet at the same time, Chinese firms are making high profile investments in Europe, Australia, Canada, and the United States where the specter of political opposition looms over every deal. Are companies stepping abroad looking for an umbrella from Beijing, or are they simply following business?
This is the question that Quan Li of Texas A&M University and Guoyong Liang from UNCTAD set out to answer in “Political Relations and Chinese Outbound Direct Investment.” Reviewing 346 instances of outbound Chinese FDI along with statistics from other sources, the scholars paint a compelling picture about where Chinese money is likely to flow in global mergers and acquisitions.
The patterns are not surprising, but what was surprising to me was the number: that nearly 350 Chinese companies are already players in outbound direct investment suggests that the comfort with those investments is growing. As that happens, expect cash-rich firms to get bolder with their acquisitions, looking more into North America as well as Africa, Eastern Europe, and Latin America.
- You: Foreign investment in China falls in Jan (nation.com.pk)
- Fixing Chinese Investment in the U.S. (pekingreview.com)
- Chinese Money Flow to Overseas Property Market and Real Estate Development (realestatejewels.wordpress.com)
- Britain turns on charm to woo China’s wealth (thehimalayantimes.com)