Capital is flowing among countries with economic globalization to realize optical allocation in a larger scope and help enterprises look for all kinds of investment opportunities globally to achieve their profit goals. In the current process of developing overseas investment, the government plays a role as a guide and servant. Overseas investment expansion and its mode evolution of Chinese enterprises indicate that more favorable national foreign policies provide necessary policy support and financial aid. Go-out strategy was clearly presented at the 5th Plenary Session of the 15th Central Committee of the Chinese Communist Party in October 2000. The session discussed and approved Suggestion on Making the 11th Five-year Plan in the 5th Plenary Session of the 16th Central Committee of the Party. The Suggestion made it clear that during the tenth five-year and even longer it was important to implement go-out strategy. It specified a direction for the development of China's foreign investment in the five years hereafter and created a good policy environment for enterprises to go out.
In October 2004, the government issued Giving Credit Support to the Key Overseas Investment Projects Encouraged by the State. It is a specified supporting measure of China to promote overseas direct investment. In October 2002, the original Ministry of Foreign Trade and Economic Cooperation issued successively Interim Measures for Joint Annual Inspection of Overseas Investment and Measures for Overseas Investment Comprehensive Performance Evaluation (Trial). In December 2004, Ministry of Commerce transmitted a Circular of on Printing and Distributing the System of Reporting Country Investment and Operation Obstacles. At the 5th Plenary Session of the 16th Central Committee of the Chinese Communist Party in October 2005, Suggestion on Making the 11th Five-year Plan of Central Committee of the Party pointed out reform and opening up must be deepened and mutual beneficial strategies must be implemented. China should support capable enterprises to go out and invest overseas in accordance with international prevailing rules, encourage overseas project contracting and labor export, expand mutual beneficial co-operation and common development. In October 2006, the State Council issued Opinions on Encouraging and Regulating Overseas Investment Cooperation of Chinese Enterprises, as the first programmatic guidance document that encourages and regulates comprehensively and systematically overseas investment since go-out strategy was proposed by the central government. It created a good policy environment for Chinese enterprises to develop overseas. In 2007, Ministry of Commerce jointly with relevant departments made go-out plan, clarify priority to ensure healthy development of go-out strategy. The government issued supporting policies in investment, foreign exchange, insurance and tax etc. State Taxation Administration will create good environment for domestic enterprises to invest overseas in five aspects. China will improve taxation policy and promote overseas investment. At present, China has established economic and trade cooperation relationships with over 220 countries and regions in a diversified market pattern. Ministry of Commerce recently issued Overseas Investment Management Rules to further improve overseas investment management system, facilitate overseas investment, support Chinese enterprises to go out and take international economic cooperation and competition. Compared with the existing provision, Overseas Investment Management Rules reserved approval rights only limited to few major overseas investments and the approval procedure of overseas investment is greatly simplified.
China overseas investment projects refers to various industries including agriculture, forestry, husbandry and fishing, energy, light industry, communication, electrics, transportation, real estate, tourism, finance, and consultancy. Investment manners are also versatile and flexible. In addition to new projects, overseas acquirement projects account for a quarter. Investment subjects tend to diversify from state-owned enterprises to private holding enterprises whose projects account for 1/5 of the total. Chinese enterprise go-out progress is still on its preliminary stage. On the premise of giving full play to market mechanism, the country will support Chinese enterprises including financial enterprises to develop overseas investment cooperation and improve policy environment in four aspects. The market subject role of Chinese enterprises in go-out process needs to be enhanced through system change and legal construction intensification. The government shall provide more standard procedure and efficient service for enterprises to invest overseas. It shall formulate relevant plans and industrial country origin guidance policies based on national conditions to connect overseas investment with domestic industrial structure optimization. It attaches great importance to culture go-out market subject. The government shall improve financial and foreign exchange policies and encourage dominant enterprises to develop overseas investment and multinational operation. The enterprises going overseas shall operate according to local laws, fulfill necessary social responsibilities including ensuring the legal rights of local employees and local partners.
China's Foreign Direct Investment in 2008
2008 witnessed remarkable adjustment in China's foreign-related business. In the first half of the year, the government continued export structure adjustment and optimization measure and made distinct achievements. In the second half, along with sudden aggravating of international economic financial situation, the government timely issued a series of foreign-related economic policies to relieve export difficulties and maintain stable increase of foreign trade.
According to China´s Balance of Payments Report 2008, China's foreign direct investment in 2008 stood at US$ 55.6 billion, up by 194% than the previous year. Repatriation including liquidation and divestment of foreign direct investment reached US2.2 billion, up by 13%. The net outflow reached US$ 53.5 billion, up by 215%. In terms of department structure, China's foreign direct investment of non-financial departments reached US$ 40.7 billion and financial departments reached US$ 14.9 billion in 2008.
In terms of investment destination, China's foreign direct investment of non-financial departments goes orderly from Asia, Latin America, Oceania, North America, Africa and Europe with a proportion in each area consecutively as 77%, 10%, 5%, 4%, 3% and 1%. Foreign direct investment of financial departments mainly focuses in areas such as USA and Hong Kong with more developed financial markets.
In terms of industrial distribution, China's foreign direct investment of non-financial departments refers to resource development, machine manufacturing, wholesale and retail, public products, design and research etc. The investment comparatively focuses in commercial service, mineral mining, manufacturing, production and supply of electricity and gas, which accounted for 60%, 16%, 5% and 4% respectively of the total in 2008.
Figure 9 6 Industrial Distribution of Foreign Direct Investment of Chinese
Non-financial Departments in 2008 Unit: %
In terms of foreign direct investment forms of Chinese non-financial departments, more competitive enterprises choose merger and acquisition for invest overseas. Multinational M & A is popular. In 2008, investment via M & A accounted for 50% of the total. For instance, Aluminum Corporation of China acquired Rio Tinto Plc listed in The U.K. with US$ 12.8 billion. Foreign direct investment of financial departments are mainly realized via abroad acquisition and setting up branch banks, accounting for 60% of total foreign direct investment of financial departments. For instance, Industrial and Commercial Bank of China acquired Standard Bank of South Africa and China Merchants Bank acquired Hong Kong Wing Lung Bank.
In terms of regional distribution, developed provinces like Guangdong, Zhejiang, Shandong and Hunan have large scale in foreign direct investment. Guizhou, Hainan, Qinghai and Inner Mongolia Autonomous Region have small foreign direct investment.
Figure 9 158 Statistics on China's Provincial and Municipal Foreign Paid-up Investment from Jan. to Dec. 2008