The footprint of China's investment around the world is growing1 and its 'going out' strategy is an increasingly important one2. Despite stricter capital outflow controls, the long-term prospect for outbound investment looks strong, with the Belt and Road Initiative (BRI) promising to be a key catalyst3.
"This initiative is creating a network of trade and financial connections not just within Asia, but with the Middle East, sub-Saharan Africa and Europe," said Stuart Gulliver, Group Chief Executive of HSBC at the recent HSBC China & RMB Forum. "China is now very visibly the world leader in promoting economic globalisation."
In the next five years the country plans to invest US$750 billion overseas4. This will allow Chinese companies to access more markets. It will also boost the country's further integration into the global economy, as well as improve capital flows, influence and connectivity4.
The country's outbound investments continue to rise sharply, growing at 44 per cent year-on-year to $170.1 billion in 2016, according to the country's National Bureau of Statistics5.
"Chinese companies are very heavily focused on the domestic market as a priority. Once that domestic market has achieved some type of sustainable revenue then they start looking externally," explains Michael MacDonald, Chief Technology Officer for Southeast Asia at Huawei.
The so called 'One Belt, One Road' initiative is part of the picture. This development plan spearheaded by China focuses on bolstering infrastructure, developing trade corridors and transport links. The scheme now covers more than 65 countries, 60 percent of the world's population and one third of global GDP6. Outbound investment to countries involved with this initiative totalled US$ 14.5 billion in 20167.
"We see it as a very positive development, it can also be a key driver, not just of Chinese growth in the coming ten to 20 years but regional growth. It's also projected to impact not just the large, well established Asian economies but some of the smaller, emerging Asian economies as well," explains Bill Maldonado, Chief Investment Officer, Equities at HSBC Asset Management.
Currently, the BRI is bringing in new opportunities for companies and enterprises involved in building roads, railways, bridges and ports8. "This is a very big initiative, similar to the U.S. Marshall Plan of the Second World War. It is China's way of exporting its surplus and enhancing trade with different countries," states Dr Frank Tong, CEO of the Hong Kong Applied Science and Technology Research Institute.
China's policy banks and funds are now in place to support this plan including the Asian Infrastructure Investment Bank (AIIB) and the Silk Road Fund, backed by US$100 billion and $40 billion respectively. Last year Chinese companies closed deals worth US$126 billion as part of the Belt and Road Initiative9.
"We see this as a big opportunity for a lot of people, not just for China, but for the destination countries and for any companies who work on such projects. It will certainly stimulate economic development along the Belt and Road," explains Helen Wong, Chief Executive for Greater China at HSBC.
This document was prepared by The Hongkong and Shanghai Banking Corporation Limited, Hong Kong Branch (“HSBC” or “we”).
The document is intended for those who access it from within Singapore. The document is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation.
The information contained in this document is derived from sources we believe to be reliable but which we have not independently verified. HSBC makes no representation or warranty (express or implied) of any nature nor is any responsibility of any kind accepted with respect to the completeness or accuracy of any information, projection, representation or warranty (expressed or implied) in, or omission from, this document. No liability is accepted whatsoever for any direct, indirect or consequential loss (whether arising in contract, tort or otherwise) arising from the use of or reliance on this document or any information contained herein by the recipient or any third party. Future changes in law, rules, regulations etc. could affect the information in this document but HSBC is under no obligation to keep this information current or to update it. Expressions of opinion if any are subject to change without notice. If you seek to rely in any way whatsoever upon any content contained in this document, you do so at your own risk.
This document does not constitute an offer or solicitation for, or advice that you should enter into or start using, any of HSBC’s products and services. Recipients should not rely on this document in making any decisions and they should make their own independent appraisal of and investigations into the information described in this document. No consideration has been given to the particular business objectives, financial situation or particular needs of any recipient. Any examples given are for the purposes of illustration only.
No part of this document may be reproduced, stored in a retrieval system, or transmitted, on any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of HSBC.
Copyright © The Hongkong and Shanghai Banking Corporation Limited, Singapore Branch 2017. All rights reserved.