Investments along the B&R continued to outperform the overall growth rate
The data from China’s MOFCOM showed that China’s overall ODI reached US$107.1 billion in the first three quarters of 2021, up 6.3% YOY². The non-financial ODI reached US$80.8 billion, up 2.4% YOY, mainly in manufacturing; information transmission, software and information technology services, transportation, as well as scientific research and technology services. The B&R non-financial ODI reached US$14.9 billion, up 14.2% YOY, representing 18.4% of the total non-financial ODI, up 1.9 percentage points YOY, mainly to ASEAN, the United Arab Emirates (UAE), Kazakhstan, Bangladesh, etc.
Figure 1: China’s non-financial ODI (US$ billion)
Quality development in overseas M&As was on track; strong participation of private equities and investment companies was observed
In the first three quarters of 2021, the announced China overseas M&A value reached US$46.3 billion, up 79% YOY; yet the value was still 13% less than the same period of 2019 before the pandemic occurred³. There were 382 announced deals which decreased 3% YOY. Among such, we observed strong participation of private equities and investment companies in the China overseas M&As. Nearly half of the China announced overseas deal value and over 40% of the deal volume in the period with each transaction exceeding US$500 million were made by investor groups of private equities and investment companies, representing a YOY increase of 20 percentage points in terms of both deal value and volume. It shows an increased internationalization of Chinese institutional investors. It also indirectly indicated an increase of overseas targets in the markets as the global economy sets to revitalize.
Figure 2: Announced value of China overseas M&As (US$ billion)
Figure 3: Top five sectors in the announced China overseas M&As in the first three quarters of 2021
Figure 4: Deal value and volume of China overseas M&As by continent in the first three quarters of 2021 (deal value in US$ billion)
Figure 5: Top 10 destinations of China overseas M&As in the first three quarters of 2021 (by deal value: US$ billion)
Figure 6: Top 10 destinations of China overseas M&As in the first three quarters of 2021 (by deal volume)
China overseas EPC contracts focused on transportation and general construction
The newly-signed China overseas EPC projects increased 6.2% YOY to US$159.6 billion in the first three quarters of 2021. The overseas EPC turnover was US$107.4 billion, up 17.7% YOY. More newly-signed overseas EPC contracts were signed. The number of new projects each value exceeding US$50 million increased by 10.8% YOY to 574, mainly in transportation and general construction.
In the B&R countries and regions, the value of newly-signed EPC contracts reached US$80.8 billion, down 3.5% YOY. The overseas EPC turnover in the B&R countries and regions was US$61.8 billion, up 16.3% YOY. Chinese enterprises are intensifying their participation in energy transformation projects in the Middle East. Key projects signed in the period included the building of a total of 2GW photovoltaic power capacity in Iraq as well as the provision of equipment related to a total of 2.1GW photovoltaic power capacity to the UAE⁵.
China announced in September 2021 to step up support for other developing countries in developing green and low-carbon energy and China will not build new coal-fired power projects abroad. It is expected that most of the world will more proactively promote energy transition and transformation and this will set to reshape the future sector landscape of oil & gas, electricity & coal mining, etc.
Figure 7: Value of newly-signed China overseas EPC contracts (US$ billion)
Summary
China’s overall ODI maintained its steady development in the first three quarters of 2021 with a YOY increase of 6.3% to US$107.1 billion. The announced China overseas M&A value reached US$46.3 billion, up 79% YOY. Asia was the top overseas M&A destination representing 45% of the overall in the period. Quality development in overseas M&As was on track and strong participation of private equities and investment companies was observed.