Outbound investment sees rebound amid challenges

China's outbound direct investment saw a strong rebound in the first two months of 2023, thanks to the country's optimized COVID-19 response measures and domestic companies' ambitious investment strategies, analysts and business executives said on Monday.

Despite facing external challenges, China's nonfinancial outbound direct investment jumped 35.7 percent year-on-year to 136.04 billion yuan ($19.77 billion) in the January-February period, according to data from the Ministry of Commerce.

Rather than investing heavily in big-ticket infrastructure and energy projects abroad, experts said the growth of China's outbound investment is likely to be driven by domestic companies' improved investment structures this year. Their capital will mainly flow into sectors such as leasing and business services, high-end manufacturing and climate change solutions abroad.

Many Chinese companies have already begun to integrate their overseas investments with global industrial and supply chains, especially in areas where China has a competitive advantage, such as trade in services, photovoltaic power generation and new energy vehicles, according to Lu Jinyong, a professor specializing in overseas development at the University of International Business and Economics in Beijing.

The ministry reported that China's outbound direct investment into leasing and commercial services rose 22.3 percent year-on-year to $4.72 billion during the January-February period, while Chinese investment in manufacturing, wholesale and retail sectors also notably increased.

Lu said this investment approach will not only allow Chinese companies to ascend the industrial chain and break away from their current midrange or low-end position but also enable domestic industrial upgrade.

Echoing that sentiment, Deng Chao, executive vice-president of China Chamber of Commerce for Import and Export of Machinery and Electronic Products, suggested that Chinese companies should adopt joint venture strategies and establish commercial alliances with multinational corporations to increase their presence in foreign countries.

"Such measures could effectively mitigate the impact of geoeconomic fragmentation and sluggish global recovery," Deng added.

With reinforced cooperation between China and the Association of Southeast Asian Nations showing the strong resilience of Asian supply chains, ASEAN will be a promising market for Chinese companies to invest in, said Chai Haitao, former director-general of the policy research department of the Ministry of Commerce.

Chai said that such moves will enrich the tangible growth of the Belt and Road Initiative and boost the trade volume among signatories of the Regional Comprehensive Economic Partnership agreement.

BYD, China's largest new energy vehicle manufacturer in terms of production volume, started building its first automobile plant in Thailand earlier this month. The factory is scheduled to commence production in 2024, with an annual capacity of 150,000 vehicles.

The factory , located in the coastal Rayong Province, is expected to serve as a hub for the production and distribution of electric vehicles in Thailand, neighboring ASEAN countries and other regions, said Liu Xueliang, general manager of BYD Asia-Pacific auto sales division.