June 8, 2017 2:00 am JST

China surges to world's No. 2 overseas investor

$183bn spending spree in 2016, up 44%, puts country behind only US, says UN

MITSURU OBE, Nikkei staff writer

TOKYO -- An overseas acquisition binge propelled China to the No. 2 spot in outbound investment in 2016, according to a United Nations report published Thursday.

The country's foreign direct investment soared 44% last year to a record $183 billion, second only to the $299 billion spent by the U.S., according to the U.N. Conference on Trade and Development. China moved up from fifth place in 2015 to reach its highest spot ever.

"In recent years, developing economies are increasingly becoming investor economies," said Astrit Sulstarova, chief of UNCTAD's data analysis section.

The upsurge reflects China Inc.'s voracious appetite for global mergers and acquisitions, the Geneva-based body said in its annual World Investment Report 2017. Anbang Insurance Group alone reportedly purchased $6 billion in assets abroad in 2016, and China National Chemical took over Swiss chemical giant Syngenta.

Corporate takeovers drove the increase, but property purchases by individuals in such developed countries as Australia, the U.K. and the U.S. also contributed, UNCTAD noted.

The trend could slow this year, however, as Beijing has started curbing outward investment, particularly takeovers.

One factor that might offset the possible dampening effects of that stance is if the government accelerates its Belt and Road Initiative to expand the country's economic sphere by linking it with the rest of Asia and Europe through infrastructure like roads and railways, UNCTAD said.

A number of countries along routes that Beijing has designated as economic corridors have begun attracting significant investment from China, the report said.

Pakistan, for instance, saw a 56% jump in inward investment in 2016. That included the construction of a power plant at Port Qasim, the country's second-largest port.

China itself is a popular investment target, attracting $134 billion last year. Although that figure is down 1.4% from the previous year, it was still enough to make the country the third-largest investment recipient, after the U.S. and the U.K.

Slide in Southeast Asia

For the rest of developing Asia, the numbers are mixed.

Inward investment surged 60% in the Philippines but fell 84% in Indonesia, 73% in Thailand, 38% in Hong Kong and 13% in Singapore.

Overall investment in Southeast Asia shrank by 20%.

UNCTAD says a division of labor is emerging South and Southeast Asia in which less-developed economies focus on labor-intensive activities and developed economies produce higher value-added goods.

For now, the less-developed economies, such as the Philippines and Bangladesh, are expected to receive more investment, especially from more-developed members within emerging Asia, the report said.

Total global inward investment edged down 1.6% in 2016, with the 5% increase in developed economies not enough to offset the 14% drop in developing economies.

Cross-border investment will likely make a modest recovery this year, increasing by around 3%, the report said, on expectations of more robust global growth, a pickup in trade and a recovery in corporate profits.

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