China Go Abroad (4th Issue)
Key connectivity improvements along the Belt and Road in telecommunications & aviation sectors
Stepping into 2016, Chinese enterprises are performing remarkably well in the global investment market: as a net capital ex porter, China's outward investment has exceeded the inward investment. The underlying high growth is the fresh and energetic momentum released by the Chinese outbound investment.
The manufacturing industry has experienced a remarkable growth in China’s outbound investments. It indicates that the policies to promote the sector’s “going out” and strengthen international capacity cooperation have been successful. Technology-rich assets are the most sought-after currently as Chinese companies move up along the value chain. Thus, European and American countries with advanced technologies, stable economies, and healthy investment environments continue to be the most popular investment destinations.
This year, 2016, is also witnessing China’s continued implementation of the “One Belt, One Road” initiative. Spanning more than 60 countries cross Europe, Asia and Africa, the initiative is fueling this round of outbound investment. In our last China Go Abroad report6, we focused on the rising high-end manufacturing power in China - the “going out” of high- speed rail and nuclear power. In this issue, we will turn to another two important sectors which also play an important role in the “One Belt, One road” strategy - the telecommunications and aviation sectors.
Outbound investment requires significant funding and needs to consider many sophisticated factors. A good financing structure will increase the success rate of investment. In the regional analysis of this issue, we will focus on Hong Kong and explore its important role in developing the “One Belt, One Road”. Because of its advantages in policy, talent and international experience, Hong Kong can serve as a strong platform from which Chinese enterprises are able to “go out” more smoothly. Relating to this, the EY Overseas Investment Growth Navigator has been developed to help Chinese enterprises to understand their possible financing difficulties and solutions, and we will look at a tax planning case study showing the importance of thorough investment and financing planning.
For those involved in this new wave of outbound investment, enterprises should not just blindly follow existing trends. Instead, they should foster their own international market perspective and undertake long-term strategic planning. We look forward to seeing Chinese enterprises embrace the world with a better market understanding and show the world a new image of the mature Chinese corporation.
Global COIN Leader
1 Source: Data include China’s financial and non-financial outward foreign direct investment (“FDI”). The financial outward FDI was collected from State Administration of Foreign Exchange (SAFE) and the non-financial one was collected from MOFCOM. EY calculated the total number
2 Source: EY analysis
3 Source: Mergermarket, including data of Hong Kong, Macao and Taiwan
4 Source: MOFCOM
5 Source: Ministry of Foreign Affairs
6 Note: Please refer to EY’s 3rd China overseas investment report Going Out – the global dream of a manufacturing power, March 2016; download link: http://www.ey.com/CN/en/Services/Specialty-Services/China-Overseas-Investment-Network/Publications