China Goes Global 2011 Survey Shows Trend towards Larger Investments by Chinese SMEs, and Growing Interest in Mergers and Acquisitions

Beijing, China - April 27, 2011 – The scale of Chinese small and medium size enterprises' outward foreign direct investment (OFDI) grew in 2010, according to a report published jointly today by the China Council for Promotion of International Trade (CCPIT), the Asia Pacific Foundation of Canada (APF Canada) and the United Nations Conference on Trade and Development (UNCTAD). The share of deals exceeding US $100 million rose from one percent in 2008 to eight percent in 2010.

The China Goes Global 2011 report, launched today at the 5th Chinese Enterprises outbound Investment Conference in Beijing, China, also found growing interest among Chinese firms in mergers and acquisitions, up from 8% in 2008 to 15% in 2010. It is estimated that China made US $23.8 billion in direct investment overseas through mergers and acquisitions in 2010, according to China’s Ministry of Commerce. Thirty-one percent of companies with an interest in mining identified mergers and acquisitions as a model for overseas investment.

"Chinese outward investment has increased 50-fold since the year 2000. The scope of Chinese overseas investment is increasing, and there is growing use of mergers and acquisitions as a method of expansion," said Yuen Pau Woo, president and CEO of the Asia Pacific Foundation of Canada. "Chinese outward investment has already made a significant impact on global resource industries. In the years ahead, Chinese companies will also invest heavily in the manufacturing sector," he added.

Manufacturing, particularly in machinery and textiles, remains a predominant focus for small and medium sized Chinese firms looking to invest overseas. Yet a growing appetite to secure raw materials and natural resources overseas is seeing a sharp growth in Chinese firms investing in the areas of agriculture (17%), mining (13%) and energy (5%). In particular, the survey indicates that the scale of overseas investment in mining is larger than in manufacturing with 21% of mining companies indicating large-scaled overseas investments valued at US $100 million or more.

Most Chinese SME overseas investments remain concentrated in Asia (41%), followed by North America (27%) and Europe (23%). One noticeable leap from 2009 to 2010 is the booming interest in Africa, up from 13 percent in 2009 to 22 percent in 2010.

Chinese investment In North America is dominated by energy and manufacturing, accounting for 31 percent of the total. The geographic emphasis in North America remains heavily centered on the United States at 78 percent. Investment in Canada rose slightly from a share of 8 percent in 2009 to 11 percent in 2010. The principal motives for investing in North America are to acquire advanced technology and management expertise, to acquire well-known brands, and to circumvent trade barriers.

According to the poll, 88 percent of companies plan to significantly or moderately increase their investments abroad in the next two to five years. The expected scale of investment remains small, with 91 percent of companies indicating their investments will be under US $10 million.

To read the full report, please click here.

China Goes Global 2011 was jointly prepared by the Asia Pacific Foundation of Canada in partnership with the China Council for the Promotion of International Trade and the United Nations Conference on Trade and Development. The survey results are based on a sample of Chinese firms which are members of The China Council for Promotion of International Trade. The survey produced 1,024 valid responses during the period of December, 2010 - March, 2011.

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About APF Canada

The Asia Pacific Foundation is an independent resource for Canadians on contemporary Asia and Canada-Asia relations. As a national not-for-profit organization established by an Act of the Federal Parliament in 1984, the Foundation brings together people and knowledge to provide the most current and comprehensive research, analysis and information on Asia and on Canada's transpacific relations. It promotes dialogue on economic, security, political and social issues, helping to inform public policy, the Canadian public and Canada’s Asia practitioners. The Foundation is funded principally through an endowment from the Government of Canada and by corporate and individual donors.

 

For additional information, please contact:

Trang Nguyen
Communications Manager
Asia Pacific Foundation of Canada
Tel: 604-630-1540
Email: trang.nguyen@asiapacific.ca

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