China Go Abroad (5th Issue)

Sound risk management builds a solid foundation for Chinese enterprises to navigate the global landscape

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“In 2016, China’s outward FDI rose 30% year-on-year to a record high of US$188.8 billion1. Progressing into 2017, in such a sophisticated and dynamic environment, it is the companies that possess sound risk management systems and make rational strategic investment decisions that can improve their overseas operating and management capabilities. EY will continue to work with Chinese enterprises to navigate the forthcoming challenges and achieve healthy and sustainable growth against this global landscape.”

Albert Ng
Chairman, China
Managing Partner, Greater China

Since the beginning of 2017, global instability, together with the rise of protectionism and populism, has contributed to political and economic uncertainties worldwide. Chinese enterprises are facing ever-tightening controls on their overseas investments. All these factors, coupled with a low growth economic environment, are bound to bring greater uncertainty and downward pressure to the investment market.

EY predicts that in 2017, the momentum of China’s outbound investments may slow down and Chinese enterprises will further strengthen their risk management capabilities to respond to various types of overseas investment risk.

However, in the long run, the Chinese government will continue to support its “going global” strategy, meaning that the growth momentum of overseas investments will remain unaffected. China will continue to support qualified and competent enterprises in carrying out strategic outbound investments, and encourage Chinese enterprises to participate in the Belt and Road Initiative and international cooperation on industrial capacity.

At the beginning of 2017, we conducted a survey regarding the outbound investment risks that Chinese enterprises face when “going global”, to explore how they manage the risks during their outbound journey. The results showed that most enterprises are aware of the risks and challenges associated with their investments, and they have reached some form of consensus in assessing the different types of risk. However, risk varies across sectors and geographies in response to the changing risk landscape. There are obvious cognitive differences between different types of enterprises in dealing with risks. A detailed analysis of the survey results will be presented in this report.

In this issue, EY Overseas Investment Growth Navigator introduces risk management strategies from a professional perspective to help enterprises improve their risk mitigation capabilities and realize high-efficiency outbound investments. We hope that you enjoy reading our insights and we would like to extend a personal note of thanks to all of our survey participants.

Loletta Chow
Global COIN Leader

 





   
 

1 Source: National Bureau of Statistics, MOFCOM, SAFE, summarized by EY