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The Next Generation of China’s Outbound Investment

After years of slowing outbound investment, Chinese companies are again expanding abroad. But this new generation of China’s overseas investment has very different objectives and destinations than in the previous decade.

After years of slowing outbound investment, Chinese companies are again expanding abroad. But this new generation of China’s overseas investment has very different objectives and destinations than in the previous decade. Rhodium Group’s new China Cross-Border Monitor (CBM) tool tracks the changing global footprint of Chinese corporations. This note summarizes the contours of China’s next-generation outbound investment and discusses the implications for business and policy leaders.

  • The slowdown of Chinese outbound investment since 2016 has been more pronounced than suggested by official data: While Beijing’s statistics show stable outbound foreign direct investment (OFDI) patterns in the past five years, transactions data suggest that outflows have dropped to only a fraction of previous highs. Official data includes significant “phantom” FDI driven by financial considerations, not real economy investment.
  • Outflows have rebounded after COVID-19 but remain far from previous highs: After hitting a bottom in 2021, announced outbound FDI by Chinese firms has rebounded in the past two years. However, investment levels are nowhere near previous highs if controlled for rumored transactions without specific location and scope.
  • New OFDI is likely to be closer to home and driven by organic internationalization efforts of mature companies: Chinese outbound investment is increasingly driven by the organic expansion of mature private companies with global ambitions rather than large one-off acquisitions. Investment is more concentrated on emerging markets than G7 economies, with a noticeable shift toward Asia.
  • Business and policy leaders will have to grapple with new opportunities and risks: This next generation of Chinese outbound investment provides opportunities for governments and businesses but will also create novel national and economic security concerns. Managing these risks may require governments to update existing policy regimes such as investment reviews, trade policy, industrial policy, anti-subsidy instruments, and supply chain security rules.

The Next Generation of China’s Outbound Investment

After years of slowing outbound investment, Chinese companies are again expanding abroad. But this new generation of China’s overseas investment has very different objectives and destinations than in the previous decade.

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Practice Area
China