Snapshot of Chinese Overseas Investments: Trends and Insights
China's non-financial overseas direct investment (ODI) reached $77.2 billion in 2012, showing impressive growth despite global financial crises. A significant portion was allocated to acquiring mineral resources for domestic economic expansion. The geographical distribution of investments by Chinese mining companies across regions like Africa, South America, North America, Asia, Europe, and Oceania reflects diversification strategies. The favored commodities for Chinese investments include iron ore, copper, coal, nickel, aluminum, platinum, zinc, and more.
- Chinese investments
- Overseas direct investment
- Geographical distribution
- Mineral resources
- Diversification strategies
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Snapshot of the Chinese overseas investments
Overall picture -In 2012, China s non-financial overseas direct investment (ODI) reached to US$77.2 billion, a growth of 12.6% over the previous year. This growth rate is quite impressive, particularly under the influence of the global financial crisis (2008) which resulted in dramatic contraction of investment activities in the world. -A large amount of the investment was for acquiring mineral resources to support the domestic economic expansion
2010 Geograpgic distribution of overseas investment by 24 Chinese mining companies with 204 projects 70 59 60 51 49 50 2009 40 30 20 20 14 11 10 0 Africa S American N American Asia Europe Ociania Geographic distribution of overseas investment of 24 Chinese mining companies with 181 projects 60 53 48 50 45 Number of projects 40 2008 30 19 20 9 7 10 0 4 African S American N American Asia Europe Ociania
Where is the Chinese money spent? 2010 Geographic distribution of total investment (US$ million) 40,000 33,391 35,000 31,537 29,847 30,000 24,125 25,000 US$ million 20,000 15,000 7,812 10,000 3,035 5,000 - Africa S American N American Asia Europe Ociania Geographic distribution of overseas investment by Chinese mining companies 2009 35,000 29,915 29,418 29,439 30,000 23,568 25,000 US$ million 20,000 15,000 10,000 6,412 5,000 503 - Africa S American N American Asia Europe Ociania
What commodities are favoured by the Chinese? 2010 40,000 30% Chinese overseas mining investment by 28 companies Investment (US$ million) Investment (US$ million) 31,663 30,073 Percentage (%) 24.4% 23.2% Percentage (%) 30,000 20% 16,533 20,000 15,993 16,112 12.7% 12.3% 12.4% 10% 8,550 6,901 10,000 6.6% 5.3% 1,453 1,442 1,026 1.1% 1.1% 0.8% - 0% Iron ore Copper Lead and Non-mining Gold Coal Nickel Aluminum Platinum commodities Zinc Other 2009 China overseas mining investment by 24 companies Investment (US$ million) 40,000 30% 30,073 Investment (US$ million) Percentage (%) 25.2% 29,265 24.5% Percentage (%) 30,000 20% 16,124 20,000 13.5% 13,554 12,736 11.4% 10.7% 10% 8,389 6,069 10,000 7.0% 5.1% 1,453 1,028 565 1.2% 0.9% 0.5% - 0% Aluminum Non-mining Platinum Iron ore Nickel Lead and Gold Coal Copper commodities Zinc Other Overseas investment by Chinese mining companies Percentage over total investment (%) 30,000 30% 25,636 2008 27% 25,000 25% 20,000 20% 15,838 US$ million 15,624 16% 13,980 16% 13,273 15,000 15% 15% 14% 6 10,000 10% 6,595 7% 5,000 5% 2,375 1,890 513 550 2% 2% 1% 1% 0 Auminium 0% Gold Platinum Copper Coal Nickel Others Iron Ore Non-mining Lead and zinc
Types of investment projects -Although most investments are directly for mining (64% of total projects), the Chinese companies are also involved extensively in infrastructure and engineering projects (25%) and trading activities (10%) to support their mining initiatives. Type of investment projects Mining Engineering Trade Other Total 165 64 25 4 258 64% 25% 10% 2% 100% 200 Type of investment projects 165 160 120 80 64 40 25 4 0 Mining Engineering Trade Other
Chinas mining investment in Africa - DRC, South Africa, Zambia and Zimbawe are the main destination countries in Africa. - Out of the total investment of US$26 billion, 81.6% or US$21 billion is for infrastructure development. Copper, iron ore and platinum are the focused commodities. Chinese investment in Africa 81.6% 25,000 90% Investment (US$ million) Percentage (%) 21,173 20,000 70% US$ million 15,000 50% 10,000 30% 10.2% 3.0% 2.1% 2.7% 0.0% 0.3% 5,000 10% 2,651 790 705 550 80 9 - -10% Auminium Copper Iron Ore Nickel Platinum Others Non-mining
CLOSING REMARKS -China is speeding up its investments in other parts of the world. The global financial crisis did not stop the Chinese ambition to secure raw materials supply. -Asia and Africa are the two main destinations for Chinese overseas investment. Australia has also become a major beneficiary of the Chinese money in the mineral sector. -Aluminium, iron ore, copper and nickel are the main target commodities of the Chinese investment. This is in line with the actual need of import of minerals in the Chinese domestic market. -Apart from the major state-owned mining companies, private Chinese investments have also become an important player in the overseas mining investment, although the latter is still relatively small in terms of capital capacity.
CLOSING REMARKS - Chinese companies are flexible in terms of format of investment and have developed various models to suit different situations: -In Asia, similarities in traditional culture and political system provide a good platform for Chinese investors to work together with the local partners. Companies often use governmental supports from both China and the host countries to advance their pursuit. -In Africa, the Chinese companies take advantages of the strong historical ties and political relationships between China and African countries to strengthen their competitiveness in acquiring mineral resources. -In their overseas quest for raw materials, Chinese companies often work together to combine their respective skills and expertise to enhance their competitiveness. They get involved not only just for development of mineral deposits, but also for infrastructures and agricultural projects. The host countries benefits more from such approach than simple mining. The Chinese investors could harvest from either mine development or infrastructure constructions or from both.
