China’s Outbound Investment Fever Continues

By Ada Wang

According to 2022 China Out- bound Investment and M & A Report issued by data service provider itjuzi.com， Chinas outbound investment is still booming.

The U.S. as the focus

It is estimated that Chinas outbound capital investment started in 2004 and that there have been 2，738 capital investment transactions so far. Between 2015 and 2019， there has been an increasing amount of outbound investment from China， and this number started decreasing from 2019. Investment decreased sharply in 2020 due to the global Covid-19 pandemic， and investment saw a rebound and further growth in 2021 when the number of outbound investment reached its historical peak with 454 cases. From the start of 2022， Chinas outbound investment has been growing further， with more than 40 cases and about RMB 5 billion worth of investment having been completed in the first two months. It is estimated that overseas investment will continue to increase.

From a global perspective， Chinas outbound investment has gone to North America， South America， Europe and Asia， but Africa is still a blue ocean market waiting to be explored. In the past decade， the focus of Chinas outbound investment has been the U.S. and a lot of investors have been seeking to grab a market share of the U.S.

Data shows that about 55% of Chinas outbound investment cases are in North America， with the U.S. receiving the bulk of this investment. That is to say， about half of Chinas outbound investment goes to the U.S.， with North America having been the first choice for most Chinese investors.

The Asian market has been the second choice for Chinese investors. The number of investment cases in Asia （except China） account for 30% of Chinas total outbound investment. India （11%）， Singapore （7%） and Israel（3%） are the top 3 destinations for investment.

Regarding Europe， the number of investment cases in Europe account for 12% of Chinas total outbound investment， with the U.K. as the top investment destination. Other areas combined， including Oceania， Africa， South America， account for only 1% of Chinas total outbound investment.

Regarding the total number of countries that are invested in， Chinas outbound investment covers 21 European countries， about half of Europe， making Europe the continent with the largest amount of countries receiving investment. This also shows the developmental balance of European countries.

According to a report issued by Merics， Chinas investment in Europe grew to EUR 10.6 billion last year， higher than the 2020 investment of EUR 7.9 billion， but still much lower than the peak of 2016. The largest investment case is the EUR 3.7 billion purchase of Philips domestic appliances business by Hillhouse Capital Group.

Investment in Europe reached a record high of EUR 3.3 billion. Investment cases include CATLs factories that were established in Germany， France and the U.K.， and TikToks owner Bytedance data base which was established in Ireland. On top of this， Chinas risk investment in Europe increased by about 100% in 2021， reaching EUR 1.2 billion.

So far Chinas investment has covered 15 Asian countries， accounting for 1/3 of the total number of Asian countries. It is the second-largest continent in terms of number of countries invested in by China.

Africa has a large number of countries. But due to geographical remoteness and a weak economy， Chinas investment has covered only 4 African countries， accounting for less than 1/10 of the total number of African countries.

Medical health as the main investment industry

According to the 2022 China Outbound Investment and M&A Report， regarding the invested industries， Chinas outbound equity investment mainly focuses on medical health industry， with 449 investment cases； the blockchain industry ranks second with 347 cases. The financial industry investment is also concentrated with 322 cases. Popular industries for Chinas outbound investment also include corporate services， retail e-commerce， intelligent hardware， automobile transportation and entertainment media， with 286， 212， 191， 144 and 112 investment cases for these five industries respectively.

Investment is relatively small for gaming， education， advanced manufacturing， logistics， local life and social logistics industries， with about 50-100 cases for each industry. Sports & games， real estate， traditional manufacturing and agriculture are the least-invested industries. Also， corporate financing cases are scarce for emerging industries like the metaverse.

The number of countries in which Chinese capital is involved also differs amongst different industries. Although medical health features the most investment cases， the financial industry covers the largest number of countries for Chinas outbound investment， with a total of 35 countries. This reflects the high concentration of investment in the medical health industry and low concentration for the financial industry. The reason for this is that the financial industry has high universality and small differenc- es across the world， and many countries have less restrictions on foreign investment in the financial industry. That is also why Chinese capital is able to be invested in a relatively undifferentiated way around the world.

The next is the blockchain industry， in which Chinas investment covers 26 overseas countries. The blockchain is consistent with the financial industry， as both of them are technical means to serve the social economy. The number of investment projects is large in the U.S. and Singapore.

Those areas that China has invested in in more than 20 countries include medical health， retail e-commerce， corporate services and automobile transportation. These several industries are popular among Chinese investors， with more than 200 investment cases for each industry.

The game industry features less than 100 investment cases but covers more than 15 foreign countries. Chinese investors have invested in the gaming industries of 19 countries across five continents. The top investment destinations include the U.S.， South Korea， the U.K. and Japan.

The industries featuring less than 70 investment cases but covering more than 10 foreign countries include tourism， education， logistics and local sports & entertainment. These industries have strong localized characteristics and require investments in wide areas.

Investors are not alone

According to the 2022 China Outbound Investment and M&A Report， the percentage of single-investor investment cases has dropped from 33% in 2016 to 16% to 2021； the percentage of two-investor investment cases has dropped from 21.6% in 2016 to 8.8% in 2021. On the other hand， the number of investment cases with more than six investors has increased from 22 in 2016 to 188 in 2021， up by eight times； the percentage has increased from 7% in 2016 to 41% in 2021.

Chinas investors have been working more smoothly together with foreign institutions， and they are not alone in the investment.

From the perspective of changes in invested industries overseas， from 2016 to 2020， health care had been the industry that receives the largest investment from China. The situation was reversed in 2021， as Chinese investors are enthusiastic about the investment blockchain industry. The number of investment cases reached 123， surpassing that of the medical industry. Chinas investment in blockchain industry started to grow in 2018 and reached its peak in 2021. The reason for this is that the current business model of blockchain lacks the basis of compliance in China. The top domestic blockchain companies like Binance have started to invest overseas. Also， the new investment institutions are headquartered in Hong Kong and focus on investment in overseas blockchain projects.

The change in the number of investment cases in the financial and corporate service industries is small. However， changes have become evident for retail e-commerce and intelligent hardware industries. In 2016 and 2017， Chinese investment in the intelligent hardware industry has surpassed that of the retail e-commerce industry. In 2018 the investment in these two industries were almost equal. From 2019， the investment in retail e-commerce has surpassed that of the intelligent hardware industry and this gap became even larger in 2021.

The preference of Chinese capital for investment in American innovative enterprises has been the highest in the recent six years. Although the amount of investment fluctuates， it has always been the top area for investment. India ranks second on the list of popular investment during 2016-2020， but the investment in India dropped sharply in 2021. Meanwhile， investment in Singapore increased markedly. The decrease of Chinas capital investment in India is mainly due to the latest policies.