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China on track to book US$1t in total offshore investment by end-2015

[BEIJING] China's outbound direct investment (ODI )is expected to surpass US$1 trillion for the first time in 2015, as slowing economic growth and rising internationalisation of Chinese business see more local companies investing overseas.

Total direct investment offshore increased to just under US$883 billion in 2014, Zhang Xiangchen, Deputy China International Trade Representative at the Ministry of Commerce (Mofcom), said on Thursday.

The commerce ministry on Wednesday reported that non-financial outbound direct investment rose 18.2 per cent to 473.4 billion yuan, or US$77 billion, for the first eight months of the year.

Mofcom on Thursday also revised up its 2014 offshore non-financial direct investment tally to US$107.2 billion from the US$102.9 billion reported previously, taking total outward investment for the year to US$123.12 billion. "Our outbound investment has maintained a double-digit growth rate, and this trend will be sustained in future," Mr Zhang told a media briefing.

China's slowing economy and market volatility is driving domestic firms to acquire foreign brands and technology, as well as diversifying, said Thilo Hanesmann, research director at Rhodium Group in New York.

The Beijing government has rolled out policies to support the global efforts of Chinese companies, offering financial incentives and removing administrative controls on offshore deals.

Chinese firms have already announced or completed 390 deals worth US$77 billion in the year to Sept 16, according to Thomson Reuters data, a doubling of the deal amount for the same period last year.

China's global M&A deal volume this year already surpasses the US$70.4 billion in deals reached in 2008, formerly the biggest year so far for offshore mergers.

Industrial deals were the biggest transactions, led by China National Chemical Corp's buyout of Italian tyre-maker Pirelli & C Spa for US$8.88 billion, which included Pirelli's debt.

Many of this year's big-ticket deals were done by Chinese firms buying financial services businesses, including HNA Group Co's subsidiary Bohai Leasing Co, which paid $2.56 billion for aviation leasing firm Avolon Holdings Ltd.

By the end of 2014, 18,500 Chinese domestic investors had established nearly 30,000 enterprises overseas, with about 77 per cent showing profits in 2014, Mr Zhang said. "State-owned firms and private companies are looking to buy overseas financial institutions that are yielding strong cash-flow and providing an international presence and market share," said Eugene Qian, China country head for UBS Ltd.


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