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China ODI Update

It has taken a long time, and there have been a few growing pains along the way (including CNOOC/Unocal and China Mobile/Millicom [1]), but there can be little doubt that China has truly arrived on the overseas direct investment [2](ODI) stage.

2007 saw the launch of the China Investment Corp., the sovereign wealth fund, which is understood to have earmarked some US$70 billion for overseas investments, and which has already made headlines with deals such as:

Interestingly, in both deals, it has been reported that China’s investment will be “passive”. But it (and Chinese government vehicles generally) is not the only ODI player, as a scan of some of the recent international investment deals makes clear:

But China does not feel it is having everything its own way and, while it has finessed its approach to international deals since the failed Unocal bid, there are still sensitivities and barriers that need to be watched. The FT reported in December on Sino-US talks to address the issue of protectionism [6]:

While deal flow is picking up, there is also likely to be strong growth in China’s investment into international equity markets, as MarketWatch has reported:

More Chinese activity can be expected in 2008, especially if fires-sale bargains present themselves to the small – but growing – group of increasingly well-funded, confident and savvy mainland corporates.

Whether they will be welcomed with open arms is yet to be seen, but if the lessons of the recent past have been taken on board (and it seems that, with more talk of minority stakes, use of foreign fund managers, and passive investments, they may have been [7]) we may see a lot more Chinese money going overseas, and more Chinese firms integrating into the global economy, in the Year of the Rat.

See news sources: