In 2020, the world economy experienced the worst recession since the 1930s. China became the only major economy in the world to maintain positive growth, and
continued to release its pulling effect on the world economy. China's outward investment developed in an orderly manner, maintained the safe and smooth
operation of the global industrial chain and supply chain, and gradually formed a new pattern of opening up. In 2020, the global pandemic of the new crown
pneumonia epidemic and the great changes in the world that have not been seen in a century were deeply intertwined. International trade and investment
shrank, and the global economy fell into recession, but the international cooperation of the "Belt and Road" showed strong resilience and vitality. The Chinese
government will promote outward investment and cooperation in an orderly manner, jointly build the "Belt and Road" with high quality, and build a community
with a shared future for mankind. Chinese companies will strengthen compliance operations, safeguard their legitimate rights and interests overseas, and open
up a new situation of win-win cooperation.
1. Characteristics of China's outward direct investment in 2020
In 2020, the world economy experienced the worst recession since the 1930s. China became the only major economy in the world to maintain positive growth,
and continued to release its pulling effect on the world economy. China's outward investment developed in an orderly manner, maintained the safe and smooth
operation of the global industrial chain and supply chain, and gradually formed a new pattern of opening up. Chinese multinational companies are increasingly
improving their ability to allocate resources globally, and their new advantages in participating in international economic cooperation and competition have
been significantly enhanced.
(I) Outward direct investment remained basically stable
From January to November 2020, China's outward direct investment in all industries was US$118.81 billion, a year-on-year increase of 1.6%. Chinese investors
have made non-financial direct investments in 6,212 overseas companies in 169 countries and regions around the world, with a total investment of US$95.08
billion, a year-on-year decrease of 3.7%. It is estimated that China's outward direct investment in all industries will reach US$113.69 billion in 2020, an increase
of 2.8% year-on-year.
(II) The international competitiveness of Chinese multinational companies has significantly increased
In the 2020 Fortune Global 500 list, there are 133 Chinese companies on the list. The number of mainland Chinese companies (including Hong Kong companies,
excluding Taiwan companies) reached 124, surpassing the number of American companies on the list for the first time (121). According to the Nihon Keizai
Shimbun, Chinese companies accounted for 119 of the 500 "unicorn" companies in 2020, ranking second in the world. 74 companies were listed in the "World's
Top 250 International Contractors".
(III) Investment and cooperation in the Belt and Road Initiative has grown steadily
The cooperation in building the Belt and Road Initiative continues to show resilience and vitality, and positive progress has been made in all aspects. The Belt
and Road Initiative projects have been steadily advanced in Singapore, Croatia, Bosnia and Herzegovina, Hungary and other places with the help of strict
quality standards, careful environmental protection design and sustainable business models. As of November 2020, China has signed 201 cooperation
documents on building the Belt and Road Initiative with 138 countries and 31 international organizations. China has established "fast channels" to facilitate
personnel exchanges with many countries, especially Belt and Road Initiative partner countries, and established "green channels" for smooth flow of goods
with countries in need. More than 10,000 China-Europe trains have been launched. Major projects such as the Jakarta-Bandung High-Speed Railway and the
Hungary-Serbia Railway are progressing smoothly, and a number of new projects have been successfully launched.
(IV) Efforts to maintain the stability of the industrial chain, supply chain and value chain
RCEP promotes the sustainable development of the industrial chain and supply chain in the region. RCEP helps to strengthen the regional industrial chain
and supply chain. By establishing a common framework of rules of origin, the scope of trade and investment liberalization has been greatly expanded,
and the "gold content" of China's free trade zone network has been significantly improved. RCEP is conducive to investors' investment layout in the
region, which will reduce economic and trade barriers, expand market access, and further facilitate Chinese companies' overseas investment.
The China-EU Investment Agreement ensures the smooth operation of the international industrial chain. The China-EU Investment Agreement is
benchmarked against international high-level economic and trade rules and focuses on institutional opening. It is a comprehensive, balanced and
high-level agreement. The two sides have reached high-level negotiation results in market access, fair competition rules and other aspects. The
completion of the negotiation of the agreement as scheduled will drive the global industrial chain and supply chain back on track as soon as possible
after the epidemic. After the entry into force of the agreement, the growth of bilateral investment will drive bilateral trade closer and further
integrate the industrial chain.
(V) The international cooperation mechanism for "going out" is becoming more and more perfect
China has accelerated the pace of major economic and trade negotiations and provided international policy support for enterprises to "go out".
RCEP contains investment clauses, covering investment liberalization, investment promotion, investment protection and investment facilitation
measures. China, Singapore, Belarus, Iceland and other countries announced the launch of follow-up negotiations on the upgrade of the free
trade agreement. They will conduct follow-up negotiations on services and investment liberalization under the free trade agreement based on
the negative list model, in order to further enhance the level of trade and investment liberalization and facilitation between the two countries.
In October 2020, the China-Cambodia Free Trade Agreement was formally signed, agreeing to further deepen investment cooperation.
In December 2020, the China-EU Investment Agreement negotiations were completed as scheduled, and high-level negotiation results were
reached to promote investment liberalization and facilitation. In January 2021, the China-Mauritius Free Trade Agreement officially came into effect,
which was the first upgrade of the investment protection agreement signed between China and African countries. In addition, China has also
continuously deepened the construction of bilateral economic and trade cooperation mechanisms with relevant countries to help enterprises
"go global". As of January 2020, China has established 9 new investment cooperation working groups with Kyrgyzstan, Bangladesh and other
countries, and a total of 44 working groups have been established. China and South Korea, Myanmar, Greece and other countries jointly held
bilateral economic and trade joint committees and other mechanism meetings to discuss the path of deepening cooperation.
(VI) The win-win effect of outbound investment is prominent
The 2020 survey of the China Council for the Promotion of International Trade shows that 35.3% of the surveyed companies employ more than
two-thirds of local employees, and Chinese companies have created a large number of jobs for local people. By investing in countries along
the Belt and Road, China has helped countries along the route to greatly improve their infrastructure, and has also contributed to the
construction of local industrial systems and industrial upgrading. In addition, China has provided many policies to support local development,
including integrating more international financial resources and providing financial support.
2. New situation facing Chinese companies' outbound direct investment
(I) The COVID-19 pandemic has impacted international investment cooperation
Affected by the pandemic, the global economy is in a deep recession. The weak supply and demand situation caused by the global spread of the
pandemic has had a serious negative impact on international investment cooperation. In 2021, international direct investment flows are expected
to further decrease by 5% to 10%, and are expected to pick up only in 2022. The survey of nearly 1,000 companies by the China Council for the
Promotion of International Trade shows that more than 70% of the surveyed companies said that the pandemic had a significant impact on
their (prepared) outbound investment, and 61.4% of the surveyed companies said that the pandemic would lead to a reduction in their outbound
investment. The epidemic has had a significant negative impact on the willingness of transportation equipment companies such as railways, ships,
and aerospace, as well as information transmission, software and information technology service companies to invest overseas.
(II) Foreign investment policies in most countries have been significantly tightened
Major European and American countries have strengthened security reviews of foreign investors during the epidemic. The tightening foreign
investment policies among developed countries are interconnected, and the intention to target Chinese capital has become more obvious.
The United States has expanded the scope of application of the Foreign Investment Committee's review, issued the "Secure and Trusted
Network Communications Act", and listed the "Entity List". The European Commission issued the "Guidelines for the Review of Foreign
Direct Investment", calling for a strong foreign investment review mechanism to avoid sensitive assets being cheaply acquired by
"problematic" foreign investors. The United Kingdom announced the "National Security and Investment Act", requiring mandatory national
security review and prior approval for acquisition transactions involving control of specific entities and assets. Canada, Australia, Japan, Russia,
India, Brazil and other countries have also tightened their foreign investment policies.
(III) "Going out" enterprises still face compliance challenges
Compliance awareness is an important guarantee for enterprises to better participate in international competition. According to a survey
of nearly 1,000 companies by the China Council for the Promotion of International Trade, more than 30% (36.2%) of the surveyed companies
have encountered compliance issues during their investment and production and operation in the host country. In recent years, the relevant
regulatory agencies of the host country have increased their enforcement efforts, and the compliance challenges and legal risks faced by
Chinese companies in "going out" have become increasingly severe. In the field of digital services, the newly announced Digital Services Act
and Digital Markets Act of the European Union stipulate digital service taxes. The cumbersome compliance requirements and high penalties
for violations of the EU General Data Protection Regulation will bring heavy compliance costs and violation costs to foreign companies. In
the field of government subsidies, the European Commission has issued a white paper on foreign government subsidies, and the newly
introduced regulatory tools will set up obstacles for some Chinese capital to enter the EU market. In the field of market economy orientation,
the trilateral trade ministers of the United States, Europe and Japan have all focused on non-market-oriented policies, trying to reshape
international economic and trade rules, causing compliance pressure on Chinese companies.
(IV) The rate of return on outbound investment has declined
Overseas Chinese companies are facing great difficulties during the epidemic, and investment profits have been disrupted, making it more
difficult to reach or exceed the break-even point. This is not conducive to China's optimization of the global industrial chain layout, among
which the return on foreign investment in high-end manufacturing and high-tech fields should be improved. Yu Yongding pointed out that
China has more than 2 trillion net assets overseas, but the investment income is negative; he bluntly stated that China's overseas assets are
in a state of "rent-eating". The 2020 Overseas Investment Risk Management White Paper released by PricewaterhouseCoopers shows that
60% of the surveyed companies believe that they face the risk of asset preservation and appreciation. The epidemic has increased the
difficulty of corporate financing, magnified the uncertainty of macroeconomic policies faced by enterprises, and kept unplanned
expenditures such as epidemic prevention high. At the same time, the production restrictions, sluggish consumption and declining demand
caused by the epidemic have caused the operating income of enterprises to decline.
III. Thoughts and Countermeasures
(I) Properly deal with the negative impact of the epidemic
Focus on solving the problems of increased investment costs, increased investment risks and increased investment uncertainty caused
by the new crown epidemic. Increase credit support for "going out" enterprises, innovate financial instruments, and set up low-cost special
funds for overseas Chinese-funded enterprises and "going out" key projects that are severely affected by the epidemic. Moderately increase
the tolerance for non-performing loans of overseas projects to relieve the financial pressure of overseas Chinese-funded enterprises.
Take the opportunity of the joint fight against the epidemic to strengthen international cooperation, continue to build a network to
facilitate the flow of people, promote the mutual recognition of international epidemic prevention and health information, optimize the
"fast channel" and "green channel" cooperation mechanisms, open green logistics channels for overseas Chinese companies, enhance
trade facilitation, and simplify customs clearance procedures. Strengthen cross-border policy communication and coordination, and
maintain partnerships with key countries.
(II) Innovate overseas investment methods
Adopt various forms such as mergers and acquisitions, joint ventures, and new establishments to develop overseas business. Faced
with the tightening investment review policies in Europe and the United States and other regions, flexibly adjust the methods of
overseas investment cooperation, and do not necessarily adopt a controlling merger and acquisition method to control the acquired
companies. Focus on small and medium-sized technology companies in countries with less investment review and relatively friendly
relations with China, or focus on using foreign knowledge and intellectual resources to carry out greenfield investment to serve the
transformation and upgrading of domestic manufacturing. Promote cooperation with overseas financial institutions, establish
multilateral and bilateral investment funds, and build a cross-border investment ecosystem. Continue to support a number of
overseas economic and trade cooperation zones with good development prospects and accurate functional positioning, build
a platform for Chinese companies to go overseas in groups, and establish the image of Chinese investment.
(III) Prevent and control overseas business risks
Do a good job in guiding enterprises and early warning of risks, check systemic risks, and establish early warning mechanisms.
While enterprises participate in the development of international markets more widely and deeply, they should do their own
business well, adhere to the bottom line thinking, improve the ability to foresee and predict risks, and strictly guard against
various risks and challenges. Relevant enterprises should be reminded to pay attention to the review risks that may arise from
investment and merger activities in sensitive industries in Europe and the United States, improve corporate compliance concepts,
promote the construction of corporate compliance management systems, and help enterprises deal with various compliance risks.
Increase the training of overseas Chinese-funded enterprises on international rules, intellectual property protection, host country
laws and regulations, etc., support them to better integrate into the local society, and improve profitability while achieving
sustainable development.
