Switch China's growing exports to promote growth of the domestic market is triggering a wave of investments abroad by Chinese companies and open doors for foreign companies to invest more in the country.
The policy change is increasing China's appetite for technology, brands and resources other commodities such as resources of labor and capital. It is integrating the country into the global economy and Chinese consumers will make an engine of global economic growth in the future.
China has become a major economic player on the world stage. His USD 9400000000000 economy represents 12% of world GDP and the country has USD 4.01 trillion of foreign exchange reserves. But direct investment assets and portfolio of China have plenty of room to grow. They represent only 6% of USD 1.46 trillion of foreign direct investment world, but this picture is changing.
For some time, the country has been dependent on exports and encouraging the growth of domestic consumption, manufacturing and services with higher added value weaning off. To accelerate this process, policymakers in China are turning to the promotion of investments and acquisitions abroad - buying overseas resources, technology, brands and knowledge.
Last year, China's outbound direct investment (ODI) increased 14.1% to a new high of USD 102.9bn. The increase in growth ODI was much more important than the growth of foreign direct investment (FDI) in China, which rose 1.7% to USD 119.6bn.
This is the first time the nominal capital flows two ways have been almost in balance. Based on current trends, Beijing predicts foreign investment could exceed inward investment for next year. Government has already begun simplifying procedures for foreign investment is allowing foreign flows to keep growing.
Geographically, Europe has become the preferred destination. Chinese investment in the European Union nearly tripled in 2014. His motivation is the acquisition of technology, brands and manufactures high quality to increase domestic competition in China and help improve trust and confidence of Chinese consumers.
We have seen a massive increase in Chinese investment flows into North America and Europe, mainly through mergers and acquisitions (M & A). The UK has been strongly oriented to Chinese acquisitions, but Germany still holds the lead in terms of total turnover. In 2013, 25 of every 120 Chinese offers mergers and acquisitions in Europe took place in Germany. France, the Netherlands and Italy are close behind.
Private companies, instead of state enterprises, have been the main Chinese buyers of European companies. The acquisition of known brands is an effective way for Chinese enterprises to accelerate its internationalization and diversification differentiate themselves from other national players and take the leading technology in the world.
This surge of Chinese investment has the potential to contribute to European growth. Although the impact of Chinese investment in the EU level has been lower so far, there are already signs of substantial income and employment generation in the host country in sectors such as telecommunications.
Perhaps the most intriguing possibility is that China's new rich could offer a broad new market for the manufacture of struggle in Europe.
Because Chinese consumers move goods more expensive and higher value added wage costs relating to European producers have become a less important factor, opening new opportunities for the relatively high costs of Europe staff high productivity.
China still maintains significant controls on capital inflows and many sectors remain closed to foreign investment, especially in services. ODI growing China is providing opportunities for European companies who have gone through M & A - companies, mainly small and medium - to enter emerging markets. And the increase of Chinese ODI also provides Beijing with a good reason to accelerate the pace of opening at home.
The winners in the growing investment abroad of China in Europe are the countries that offer the most welcoming atmosphere. The authorities should ensure that their country captures the opportunity of this increasingly important source of capital.
The ongoing liberalization of the renminbi is another reason why it is easier for Chinese companies to invest abroad. The use of the renminbi to settle cross-border transactions helps reduce currency conversion costs, reduce exposure to fluctuations in the exchange rate, to simplify the procedures for payment and improve the efficient use of funds.
In 2013, renminbi was used around 60% of FDI, but only accounted for only 15% of the ODI. We expect the renminbi more of China's ODI comprise over time. The next phase of investment flow renminbi will focus on the strategy of "going-out" of China.
A number of M & A abroad, for example, have been achieved with payments or capital contributions remitted in China outer continental renminbi. Chinese corporations are aggressively seeking overseas acquisitions. Private equity funds also invest offshore.
China has emerged as a major economic power in the world scene for over three decades. In recent years, the rapid development of investment determined by China and the growing importance of the renminbi as a currency for trade and investment deepen their growing influence in global financial affairs. Expect to see more headline making investments ahead of China.
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