China recorded a net investment outflow under its capital account for the first time, reports China Business News. Yet geopolitical shifts, and the weakness and imbalance of global economic growth, as stated in an Annual Report on China's Outbound Direct Investment and Host Country Risks have brought great challenges to China's ODI.
It predicts that
- Western nations will continue tightening inflows of foreign investment
- they will specially protect core infrastructure and key technology companies to prevent foreign acquisition
- developing nations will press for greater localisation
A major risk facing overseas M&As by Chinese firms is host countries reviewing market access. Chinese investors may come up against new restrictive policies of
- tightening investment access to industries of strategic importance, including
- agriculture
- electronics
- chemical
- communications
- upgrading national security screening of foreign investment
The Annual Report also lists countermeasures for Chinese firms Going Global, namely
- on a governmental level: balancing capital outflow and inflow needs, and protecting the interests of Chinese investors through international agreements
- on a business level: experimenting with different ownership systems for Going Global (including partnerships with western MNCs), to reduce visibility and political risk of investments
The Annual Report was jointly produced by China Bond Rating Co Ltd and Chinese Academy of Social Sciences Institute of World Economics and Politics.