China's expanding industrials to boost outbound investment 10%

Promotion of the "Go Global" policy and the Belt and Road initiative is set to see China's outbound investment grow by over 10%. Chinese machinery and nuclear power companies are planning overseas expansion, allowing Chinese investors to access a greater number of quality, international investment opportunities.

A trial train takes a test run on the Ankara-Istanbul high-speed railway constructed by China Railway Construction Corporation Limited (CRCC) in Turkey on Jan. 4, 2014. [Photo/Xinhua]

China's outbound investment is expected to continue to grow at an impressive rate of over 10 percent, and maintain this momentum for the next five years with the continuous promotion of the "Go Global" policy and the gradual implementation of the national strategies of the Belt and Road initiative as well as "Made in China 2025," said Loletta Chow, EY's Global China Overseas Investment Network Leader, in Beijing yesterday.

In addition to ascending to the upstream industry chain of developed countries in Europe and America, Chinese investors will enjoy greater investment opportunities in the countries and regions along the Belt and Road, among which, high-end machinery manufacturing such as high-speed rail (HSR) and nuclear power will become the key priorities for those companies who aim for high-end transformation and overseas expansion, according to EY's newly-released report entitled "Going Out: the Global Dream of a Manufacturing Power – 2016 China Outbound Investment Outlook."

"Chinese enterprises' overseas investments will become more diversified and be of higher quality. They focus on acquiring high value-added technology and marketing networks, so as to increase their international competitiveness," said Chow.

Data shows that China HSR has built nearly 19,000km of HSR lines, which account for more than 60 percent of the total world HSR length. China leads the way with 24 nuclear power units under construction. EY believes that rich experience, low cost, advanced technology and sound financial support mechanisms are the four advantages of China HSR and give the industry in a more competitive position in the global market.

China's economic growth has slowed to a rate of 6.9 percent in 2015, the lowest in the last five years. However, its outward FDI grew by 13.3 percent in 2015, hitting a historical high of US$139.5 billion. Over the past five years, China's average annual economic growth has been 7.4 percent, but its outward FDI CAGR (Compound annual growth rate) has reached as high as 16.9 percent. In 2016, China's overseas investment has stayed strong, although global economic recovery remains uncertain. One of the announced key deals was ChemChina's acquisition of the Swiss giant Syngenta for more than US$43 billion, the biggest-ever overseas acquisition by a Chinese enterprise.

EY also co-released the "One Belt One Road" Chinese Outbound Investment Country Report, which analyzes the investment markets, opportunities and challenges of 23 countries along the Belt and Road, as well as the EY Tax Guide for Investment along the "One Belt One Road", which reveals the relevant tax risks and management experiences during investment in those countries by analyzing the major issues that Chinese enterprises might face in detail, including investment and financing structure selection, tax disputes resolution, Chinese enterprise income tax considerations, expatriate tax administration, tax consideration and tax systems of hotspot projects and countries.