context: As export growth strains under US tariffs and geopolitical risk, Beijing is doubling down on outbound investment and offshore production to reduce exposure and keep growth steady. Yet new investment restrictions and security risks may still curb their overseas reach.
Huo Jianguo 霍建国 China Society for WTO Studies vice director explains the PRC’s expansion in outbound investment
- the introduction of ‘expanding two-way investment cooperation’ marks a new policy emphasis in the 15th 5-year plan
- implies expanding foreign investment inflows, particularly into the services sector to support domestic demand
- and broadening outbound investment channels
- encouraging overseas supply chain and more efficient global resource allocation
- the PRC enters new phase of global industrial chain expansion
- external pressures are constraining export-led growth model
- the PRC needs to explore ‘innovative development of trade’
- overseas investment increasingly used to sustain trade
- reflects the PRC’s shift from export dependence to global production and market integration
- rising income levels place the PRC in a mature stage of outward investment development
- firms with competitive, internal, and location advantages are capable of expanding abroad
- external pressures are constraining export-led growth model
- the PRC has ranked among top three globally in outbound investment flows for 13 consecutive years
- expansion in sectors such as solar, batteries and EVs has strengthened firms’ confidence in outbound investment
- indicate that PRC firms have entered a new phase of expanding overseas investment and accelerating global supply chain
- a moderate trade surplus supports economic growth
- at a five percent GDP growth rate, it contributes around 1.5 percentage points, providing strong support to overall growth
- excessive surplus increases vulnerability to external shocks and export disruptions
- e.g. the 1998 asian financial crisis and the 2008 global financial crisis severely disrupted PRC exports
- persistent surpluses contribute to tensions with trading partners
- PRC runs goods trade surpluses with around 150 out of 181 economies
- the PRC-US goods trade imbalance is driven by structural factors
- achieving balance requires long-term adjustment
- the PRC should proactively address imbalances with other trading partners to support stable and diversified international relations
- after joining the WTO, the PRC’s export-oriented economy advanced significantly
- with general trade and domestic manufacturing capabilities strengthening and achieving scale advantages, accelerating industrialisation and its position as a global manufacturing hub
- this growth has relied on both reform and opening and close integration with the global economy
- exports to US and EU markets are reaching their limits, requiring more proactive structural adjustment of the PRC’s export-oriented economy
- three parallel policy paths
- expand domestic demand
- leverage large domestic market
- increase imports to move toward balanced trade
- develop services and digital trade
- raise share of high-value, knowledge-intensive exports
- reduce reliance on goods trade surplus
- expand overseas production and localisation
- ‘produce locally, sell locally’ through outward investment
- mitigate trade frictions and rebalance trade structure
- expand domestic demand
- three parallel policy paths
- government to strengthen guidance on overseas investment planning
- improve facilitation measures for outbound investment
- firms required to enhance risk management capabilities