China's Overseas Investment: The U.S. Wants to Tie Us Down, but We Have Our Own Strategies

Ladies and gentlemen, recently the U.S. has been trying to lure our manufacturing companies to set up factories there, claiming to help them “soar,” but in reality, they’re on guard at every turn and treat us like thieves. So, do we really have no choice but to go to the U.S.? Of course not! When it comes to “going global,” Chinese companies not only have plenty of options, but they’re also thriving. According to data I found in the *US-China Two-Way Flow* report released by the U.S. think tank Rhodium Group, the total value of new outbound direct investment by Chinese enterprises reached $124 billion the year before last, an 18% year-over-year increase—the highest level since 2018. After emerging from the pandemic slump, investment has begun to rebound. Hearing this, I became curious: aside from ByteDance’s $37.7 billion data center in Brazil, where else have our companies invested, and in what sectors? Drawing on this report, I’ll break down last year’s trends for you. First, Chinese companies’ overseas investments are increasingly shifting toward Asia, Africa, and Latin America. In 2016, 70% of China’s outbound investment went to mature markets in Europe, North America, and Oceania, primarily in the form of large-scale acquisitions. Now, however, Asia, Africa, and Latin America have become the main targets, accounting for over 80% of investments. In Asia, investments are primarily directed toward manufacturing, data centers, and the extraction and processing of raw materials; in Africa, they focus mainly on energy and materials—such as iron, hydrogen, ammonia, and helium; and in Latin America, they center on mining and infrastructure. This approach is much more low-key than previous investment strategies. Second, our investment projects fall into two categories: greenfield and brownfield. Greenfield projects refer to those built from the ground up, while brownfield projects involve the acquisition of existing enterprises. Prior to 2022, our annual greenfield investment hovered around $100 billion, dominating the landscape for the past five years, with investments primarily focused on capital-intensive sectors such as mining, data centers, and energy. Transactions involving the acquisition of existing enterprises peaked in 2016 and have gradually declined since then. After 2022, there were an average of only three acquisitions per year exceeding $1.1 billion, but last year saw nine such deals, with the total transaction value doubling compared to the low point in 2022—indicating that Chinese capital has become active again. A closer look at individual sectors reveals that the automotive industry remains the primary driver of investment, accounting for 13% of total investment. However, this share is at its lowest level in five years, indicating that the growth rate of the electric vehicle (EV) manufacturing value chain is slowing, and opportunities for value creation across various segments have narrowed. In particular, investment in battery materials has leveled off, with virtually no new battery-related investments last year. As for data centers and consumer goods, these are the main areas attracting investment from Chinese companies. The growth in data centers stems from the explosive development of the AI ecosystem in Southeast Asia, while investments in consumer goods are primarily driven by mergers and acquisitions of established European brands. The remaining major categories—energy and basic materials—accounted for nearly half of the total overseas investment by Chinese companies. In the energy sector, growth in wind power offset the decline in solar investment, while the high level of investment in basic materials was primarily driven by capital-intensive projects, such as the Simandou mine in Guinea. This resembles the strategic asset acquisition model of a decade ago, except that this time, corporate capital is flowing toward raw materials and data centers, reflecting a greater emphasis on strategic positioning. Judging by the record-high Chinese exports in 2022, our overall globalization strategy remains export-oriented. Over the past few years, the pace of domestic capacity expansion has far outstripped that of overseas production, raising genuine concerns that domestic technology might flow out through investment—or even fall into the hands of unfriendly nations. On the other hand, however, the number of manufacturing facilities China invested in overseas was much smaller before the pandemic and has now increased significantly. This indicates that more companies are beginning to shift part of their production overseas to achieve localization—which is why large greenfield projects by companies like BYD are attracting so much attention, as they represent a growing trend. The United States has long been a major capital power and a global investment powerhouse, but it is now pulling back and even forcing others to invest there. In the eyes of many, China is seen as merely a diligent manufacturer, incapable of effectively managing capital. However, driven by surplus funds and the need to expand our markets, we now have no choice but to devote more energy and resources to building overseas production bases to pave the way for new revenue streams. Chinese companies won’t be easily tied down to any one place—if the U.S. tries to tie us down, we’ve got our own clever strategies!