Chinese outbound investment to top $800b by 2016
Chinese outbound investment will expand by $800 billion over the five years to 2016, according to A Capital, a private equity firm focused on cross-border transactions involving Chinese companies. The cumulative value of outbound deals has risen tenfold in the last 10 years, reaching $68 billion in 2011.
The projection is based on the Dragon Index, a tool launched by A Capital to monitor the growth of Chinese outbound direct investment (ODI). It measures the growth rate of Chinese ODI stock relative to GDP and tracks Chinese ODI aggregated by investment and investor type, geographical region, and reason for investment.
The index found that Europe was the primary beneficiary of Chinese ODI last year, receiving 34% - or $10.4 billion - of the total. Chinese M&A activity in the US, meanwhile, fell to $3.2 billion from $7.2 billion the previous year. Investments by privately-owned firms saw their share of deal value rise to 28% from 17%. They account for 61% of deal volume.
Technology and services-related transactions are also growing rapidly - 49% of the total in 2011 compared to below 25% the previous year - which suggests that Chinese investors are climbing the value chain.
"Chinese investors are increasingly looking for added-value - high-end manufacturing, brands, distribution, rather than the usually-reported natural resources investments. 50% of deals are now following this trend, double that in 2010," said Andre Loesekrug-Pietri, founder and managing partner of A Capital.
In 2010, the private equity firm participated in Chinese conglomerate Fosun's acquisition of a 7.1% stake in Club Méditerranée (Club Med). Last year A Capital announced a renminbi-denominated fund, launched in conjunction with the Beijing Municipal Bureau of Financial Work. The vehicle, which has a target of RMB3 billion ($476 million) will focus on outbound deals.
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