While foreign investors are losing their taste for China, Chinese businesses are getting hungrier for overseas assets.
Foreign direct investment in China’s economy came in at $59.1 billion in the first half of 2012, down 3% year-to-year. That reflects slower economic growth, which makes China a less attractive place to invest. A remission in yuan appreciation, falling property prices, and dismal mainland equity markets have taken the shine off the China bet, too.
The story on China’s outbound investment is the reverse. Overseas direct investment in the first half came in at $35.4 billion, up 48% year-to-year. That reflects a combination of abundant cash on the books of Chinese firms, and bargains to be had as foreign asset prices remain depressed.
It also reflects moves by Beijing to encourage Chinese firms to spend more of their foreign earnings on productive assets, rather than hand the cash over to the central bank to park in ultralow-yielding government bonds. China’s holdings of U.S. Treasurys fell $6.4 billion in the year to April, the latest month for which data is available.
There are no surprises on the top sectors for surging outbound investment. Oil and gas and mining top the list for China’s outbound mergers and acquisitions, according to numbers from Dealogic. That reflects a voracious appetite for energy and metals, where $9.4 billion in deals accounted for 45% of China’s outbound M&A in the first half.
