Historic and Emergent Trends in Chinese Outward Direct Investment

A substantial body of literature has grown on the prominence of China as a recipient of foreign direct investment (FDI) and its consequences for national economic development and management practice (Branstetter and Lardy, 2006). By contrast, much less attention has been paid to China’s position as an FDI source. Given that China attracted an annual average FDI inflow of around US$29bn (or more than 7% of the world’s total) in the 1990s, but contributed less than US$2.5bn (around 0.6%) to global outflows, this is perhaps not surprising (UNCTAD, 2006). However, the sharp growth in Chinese outward direct investment (ODI) evident since 2002 (illustrated in Figure 7.1) combined with a number of recent high profile attempts by Chinese enterprises to acquire North American and European firms have brought into relief China’s rising status and potential as an investor nation. This potential is recognised in a recent UNCTAD survey of investment promotion agencies which predicts that China will become a ‘top three’source country for FDI before the end of 2008 (UNCTAD, 2005). It is also highlighted by the Director-General of UNIDO, Kandeh Yumkella, who suggests that annual flows of Chinese outbound investment are likely to reach US$60bn by 2010 (MOFCOM, 2006). If growth rates in Chinese ODI continue and these predictions are realised, China’s contribution to global FDI flows is likely to approximate current outflows of the leading industrialised countries.