Chinese companies have been stepping up their global investment spree in the past 12 months. Mergers and acquisitions by private Chinese investors are becoming the key drivers of the country’s outbound direct investment.
In what has been called the ‘Third Wave’ of China outbound direct investment (ODI), the focus of investment has been on companies in the developed economies in high-tech and services. Previous ‘waves’ have focused on supporting developing economies and investing in commodities and extraction industries.
The increase in China’s ODI is driven by the central government’s strong encouragement for domestic companies to invest overseas in a bid to boost theirinternational competitiveness. The added benefit to Beijing of ODI is it utilises surplus domestic capacity and helps to slow the rapid build-up of the country’s foreign exchange reserves, which reached a record $3.8tn at the end of 2014.