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China Economic Reform

Government defaults, pose major risks to China's overseas investments

Xinhua Finance | Wed,2016-09-14

Government defaults and unconventional security problems are major risks of Chinese enterprises in overseas investments, said China Export and Credit Insurance Corporation (Sinosure) in an annual report on world investment risk for 2016 released on Monday.

According to statistics from China's Ministry of Commerce, the country's non-financial foreign direct investment (FDI) hiked 61.8 percent on year to 673.24 billion yuan in the first seven months of 2016, which reiterates that China, used to be a magnet for foreign investment, is a net capital export country.

Investments by Chinese enterprises in developed countries and regions saw rapid growth, and their activities in Belt and Road countries also steadily advanced.

Meanwhile, overseas investments by Chinese enterprises are quite diversified, expanding from energy and minerals to infrastructure, real estate, high technologies and finance. Cross-border mergers and acquisitions has become a major form of overseas investment by Chinese enterprises.

Chinese enterprises are faced with risks which are much more complicated than ever before in their globalization process. In recent years, political risks especially government defaults and unconventional security risks have severely restrained the global layout of Chinese enterprises, said Huang Zhiqiang, deputy general manager with Sinosure, at the releasing ceremony of the report.

The report points out that the world would see increasingly strong influence of politics over economy in the future as world economic recovery faces multiple difficulties and challenges on growing uncertainties of world economy, lack of growth power, inadequate demand, and unbalanced developments among countries and regions.