China’s outward FDI reaches new highs on strong growth in 2012-13

HONG KONG – Helped by government policy initiatives, China’s outward direct investment (ODI) rebounded in 2012 and remained resilient in 2013, according to a new research report by BBVA Bank, which says China is now the world’s third-largest FDI provider, up from sixth place a year earlier. Asian economies remain the largest recipient of Chinese FDI, but flows are beginning to increase rapidly to the US and LATAM.

BBVA says Hong Kong is the largest recipient of China’s ODI, accounting for about 58% (in part due to its role as an intermediary of flows between China and the rest of the world). Growth to other regions continues, especially to the US, Central Asia and Latin America.

Official policy initiatives are facilitating ODI flows, BBVA says. Specific targets and measures were announced with the launch of the 12th Five-year Plan in 2011, and more recently in November’s “Third Plenum”, which highlighted deregulation and market openness to promote both inward and outward FDI.

RMB internationalisation is facilitating the pattern and growth of ODI, with an increasing share of China’s ODI denominated in RMB. Growing offshore RMB business opportunities are creating greater incentives for China’s domestic financial institutions to go global, BBVA says. www.bbvaresearch.com (ATI).