China Analysis: Facing the risks of the 'going out strategy'

China analysis: Facing the risks of the “going out strategy”

China is transforming itself from a major exporter of goods to a major exporter of capital. By 2009 Chinese investors had established more than 13,000 companies abroad, and China was one of the world’s leading global investors. But China’s external financial flows are often opaque: the three main global destinations for Chinese FDI are the British Virgin Islands, the Cayman Islands and Luxembourg.

But this new role carries profound implications for Chinese diplomacy and its economy. “Facing the risks of the “going out strategy”, the latest edition of ‘China Analysis’, published by ECFR and Asia Centre explores Beijing’s foreign financial footprint and highlights the concerns of Chinese investors and political analysts.

• The inside story on what went wrong with the recent botched Chinese infrastructure deal for a Polish motorway

• Why Chinese investment strategies are driven by politics as much as business. They are vulnerable to actual geopolitical risks or to opinion trends. “Economic nationalism” is also on the rise in the West.
   
• Chinese investors often lack business skills, market experience and legal knowledge about the host country, and this is more of an obstacle in highly developed economies.
   
• China cannot find the answers to its investment risks in military or hard power solutions. Its cultural and even political diplomacy is obsolete. China must remake itself as an integrated international partner, which requires political change at home.

Click here for a pdf copy of ‘China Analysis: Chinese overseas investments’

The ‘China Analysis’ series, published by ECFR and Asia Centre, analyses the debates over China’s policies and direction within China’s expert community itself.

Useful facts:

• In 2010 Chinese investment in the EU increased by 102% and the US by 74%.
• 15% of the Chinese firms that have ‘gone abroad’ chose Europe.
• Between 2002 and 2009 China’s total foreign investment amounted to US$47 billion, placing China in the ranks of the world’s five leading global investors.
• By 2009 Chinese investors had established more than 13,000 companies abroad, in over 180 countries and territories.