China\'s appetite for investment abroad is not waning

China, once the world's largest recipient of foreign direct investment (FDI), has now emerged as a major foreign investor in the world. It still is attracting sizeable FDI, but the craze has now ebbed for two reasons: first, new centres of emerging markets are increasingly drawing the investors' attention; and two, China's growth rate has slowed down. Besides, China itself has also been attracted to invest in some of those emerging countries.
However, with the slowing down of the Chinese economic growth in recent years, the West's mainstream media outlets have lately been casting doubts whether it will still be able to keep expanding its foreign investment. A western news agency reported from Beijing in late July that flood of billions of dollars out of China has slowed down "dramatically" as reflected in the second quarter of official figures released. It further commented that this happened "despite the Chinese currency Yuan's persistent weakness making it less attractive to hold." The report has actually hinted at the possibility of fund withdrawal by the foreign investors in China who are not prone to risk taking.  
The report quotes the State Administration of Foreign Exchange (SAFE) spokesperson Ms Wang Chunying as telling a press briefing: "Cross-border capital outflow pressures have gradually eased." She insisted that capital was leaving mainly because of "continued expanding overseas investment" by the Chinese firms rather than capital withdrawal from China." Wang pointed out that foreign exchange settlement data showed that banks in China have sold $49 billion more in foreign currency than received between April and June this year.  However, it "sharply narrowed" from $124.8 billion in January-June period.
In an earlier commentary, The Economist of London in January this year stated that during the last six months of 2015, capital left China "at an annualised rate of about $1.0 trillion." This was, it added, despite a record trade surplus of $595 billion in 2015. But that is another story.
China's attempt to invest in the west, particularly in the US, Australia and Europe with some exception, of course, has always been viewed with suspicion and a number of conditions were put up to stall such investments on security ground. It happened repeatedly with the US in the past and now happening elsewhere. Despite such obstacles, array of investment bids by the Chinese companies have become visibly successful.  Recently, Australia has tightened its foreign takeover rules to ensure all sales of ports, electricity network and public infrastructure are scrutinised by the Foreign Investment Review Board (FIRB).
AUSTRALIA QUESTIONS CHINA'S PROJECT BIDDING: The latest decision followed the controversial A$506 million sale to China's Landbridge Group of a 99-year lease on Darwin port - strategically important area as US marines stationed at a nearby naval base - without a formal review by the FIRB.  It appears that the completion of the Darwin port deal must have annoyed the Pentagon policy makers noticing how such a deal involving an important port could be finalised without any "proper investigation" about the port's strategic value by the Australian policy makers.
The State Grid Corporation of China and Hong Kong-based Cheung Kong Infrastructure were reported to have submitted separately a bid for over A$10 billion plus for a 50.4 per cent stake in Austgrid. This is an attempt to privatise the facility, but it is unlikely to attract any local bidder.  The sale of the New South Wales electricity distribution company has drawn sharp criticism from Nick Xenophon, a senator whose small party has gained influence in the July 02 knife-edge election in Australia.
According to another story in the Financial Times, the NSW government said that "it had had extensive discussions with FIRB throughout the process." Last year, the NSW government had discussions with Australian Treasurer Scott Morrison, only who has the authority to give permission, had sanctioned the sale of TransGrid, the state's electricity grid, to a consortium backed by Canadian and Middle Eastern investors for A$10.3 billion.
Tom Butcher, co-head of infrastructure at the Bank of American Merrill Lynch said: "Australia can't meet its infrastructure funding needs without foreign investments. The Chinese investors in Australian infrastructure are typically industry players who are bringing their expertise and know-how to Australian assets. They're not just financial investors."
Treasurer Scott Morrison, however, had earlier blocked the sale of a vast cattle farm S Kidman Co to a Chinese firm. It is not clear if the cattle farm had any geopolitical or strategic importance attached to it.  
CHINESE FIRMS ON OVERSEAS ACQUISITION BINGE: Chinese companies - both state-owned and private ones - appear to be in an acquisition mood this year and they are making bids all around - in Asia, Europe, Australia and Latin America. The biggest of all the deals came from the state-owned China National Chemical Corp. (ChemChina) in February  this year offering $43 billion for Swiss pesticide and seed giant Syngenta. No details are available now. The discussions are on for this mega project and if and when completed, it will be the biggest ever acquisition in history by a Chinese firm.
Chinese conglomerate Fusan with interest from property to mining, has signed an agreement in late July to acquire Brazil-based investment management firm Rio Bravo, which is likely to be another massive deal. It is said that Fusan will buy the controlling share of the privately-owned Rio Bravo Investments. However, no details have been made available, including the value of the deal.
According to the statement issued by Fusan chairman Guo Guangchang, the latest deal was an "important milestone for laying out of Fusan's globalization efforts of being present in the important emerging economies." The company's idea is to use this acquisition as a gateway to Brazil and Latin American region and get involved in businesses such as property and investments.
Besides, the Chinese conglomerate also announced on July 29 that its pharmaceutical division would buy over 86 per cent stake in India's Gland Pharma, a major Indian pharmaceutical manufacturing company for about $1.26 billion. More details about the proposal are still awaited. In the same month of July, this firm has successfully completed a takeover of the English football club Wolves.
Reports say, the chairman of the Hong Kong-listed Fosun Guo Guangchang is often compared with famous American investor Warren Buffet. Fosun also owns Club Med and has a stake in Cirque du Soleil.     
Apparently all these are happening because the Chinese government has lately been encouraging companies to invest abroad to gain access to foreign markets and technology at a time when Chinese economic growth is slowing down. It was said that in the late 1990s, for well over a decade, China has been the engine of global growth. Now that the blistering pace of growth has slowed, it is trying to use its economic muscle to meet the shortage of world's investment capital in enlightened self-interest.   
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