china’s investment practices, patterns, and strategies

China’s Investment Practices, China’s Investment Practices, Patterns, and StrategiesPatterns, and Strategies

James R. BarthJames R. BarthAuburn University and Milken InstituteAuburn University and Milken Institute

11

Auburn University and Milken InstituteAuburn University and Milken [email protected]@milkeninstitute.org

China 2015: China’s Outward Direct InvestmentChina 2015: China’s Outward Direct InvestmentSponsored by the Office of Asian Pacific and Latin American AnalysisSponsored by the Office of Asian Pacific and Latin American Analysis

Washington, DCWashington, DCJuly 17, 2008July 17, 2008

Talking PointsTalking Points

� How are Chinese firms financing their overseas investments, including through IPOs and corporate earnings? � Most Chinese firms fund overseas investments through their own

earnings or earlier IPOs when they obtained foreign exchange through IPOs abroad. It is unlikely that firms did IPOs because they wanted to invest abroad.

� What role do foreign exchange reserves, through the CIC (or more recently SAFE) in supporting the overseas expansion of Chinese firms?� It is stated that SAFE and CIC are portfolio investors and do not engage

in direct investments or make loans. As indicated above, Chinese SOEs invest abroad through a combination of own earnings and bank loans. They do not obtained funds from China’s foreign exchange reserves. The CIC has indicated that they are investing through fund managers and acquire direct holdings of listed securities and private equity.

22

Talking PointsTalking Points� What are the roles of the China Development Bank, China Export Import Bank,

and China's state-owned "commercial" banks in providing financing for Chinese firms going global?� Export Import Bank lends according to the policy-based rules, which would be

either aid-loans or follow OECD rules of export financing. The CDB and listed Chinese banks are supposed to lend according to commercial terms that are set according to the risks involved. The PBC allows them some discretion in setting lending rates according to their risk levels, but the rate are nonetheless subject to ceilings. My impression is that they do not subsidize such loans.

� How important is "below market" financing for Chinese firms' expansion overseas?� How important is "below market" financing for Chinese firms' expansion overseas?� My understanding is that typically Chinese firms do not get below market

financing, but there are aid programmes where the borrower may get below market rates, (e.g. where these are grant related) that may facilitate overseas investments. However, in 2004, a policy was introduced by the Ministry of Finance and the Ministry of Commerce to subsidize investment by Chinese companies in overseas natural resources.

� What is the significance of CIC's ownership of Central Huijin? Does CIC have a special dispensation, or are its investment choices reviewed at higher political levels?� Central Huijin was part of the package taken over by CIC, so it is part of its

portfolio. The official policy is that CIC is charged with delivering better returns on its resources and it has an independent governance system to allocate its resources.

33

Talking PointsTalking Points

� What is Beijing doing to ensure Chinese banks can adequately support Chinese firms' overseas activities?� The Chinese banks follow their customers just like banks in other countries

that also follow their customers abroad. The CBRC supervises the banks and is supposed to ensure that they lend according to risk criteria and have the proper internal controls and capital resources to back such risks. Chinese banks are still quite conservative with respect to overseas expansion and the outward direct investment trend is still in its infancy. I personally do not see the direct investment trend is still in its infancy. I personally do not see the Chinese banks venturing abroad on the same scale as the Japanese banks in the 1980s.

� Concluding Comment� There are a lot of emotional views on SWFs, particularly the view that they

will try to gobble up Western assets. Given the global imbalances, why should the surplus countries invest only in bonds? Each country has its own takeover rules so that there are limits to any acquisitions by any single party. In addition, there are National Security policies that would apply for strategic assets. It seems reasonable to assume that SWFs want to protect their principal and total returns, without evidence to the contract.

44

� We will strengthen and improve foreign exchange administration, and actively explore and develop channels and means for appropriately using state foreign exchange reserves.

� China is preparing for the establishment of a foreign exchange investment company, which will not be affiliated to any government department or institution.

Motivation for China’s Outward Motivation for China’s Outward Foreign Direct InvestmentForeign Direct Investment

55

institution.

� We will strengthen and improve foreign exchange administration, and actively explore and develop channels and means for appropriately using state foreign exchange reserves.

� The new company will not have any adverse impact on U.S.-dollar denominated assets.

- Chinese Premier Wen Jiabao

Source: Embassy of the P.R. China in the USA, 2007.

� According to the “10th Five-Year Plan for National Economic and Social Development,” China will “proactively make use of overseas natural resources, establish overseas supply bases for both oil and gas, diversify oil imports, build up a strategic petroleum reserve and maintain national energy security.” (Source: People’s Daily)

� In 2004, a policy was introduced by the Ministry of Finance and the Ministry of Commerce to subsidize investment by Chinese companies in overseas natural resources. (Source:


to subsidize investment by Chinese companies in overseas natural resources. (Source: Ministry of Commerce)

� The National Social Security Fund has been allowed to invest abroad since 2006 with an upper limit of 20% of the fund’s total assets, currently amounting to over RMB400 billion (USD55 billion). (Source: Economic Focus, Hang Seng Bank, February, 2008)

� “[A] force driving outward FDI by large countries such as China and India has been the desire to secure long-term supplies of natural resources (particularly oil and natural gas, iron ore and other minerals) to meet domestic demand.” (Source: Carlos Fortin, UNCTAD)

66

� The State Asset Supervision and Administration Commission (SASAC) was set up in April 2003 with the mandate of turning the country's top state-owned enterprises (SOEs) under its control into 50 global multinational corporations that feature on the global Fortune 500 list. (Source: China Economic Review, February 2004)

� It is not only the biggest SOEs that are being encouraged to go abroad. Every company that wants to invest overseas must get regulatory approval, but in 2003 the Ministry of


that wants to invest overseas must get regulatory approval, but in 2003 the Ministry of Commerce (MOFCOM) and the State Administration of Foreign Exchange (SAFE) introduced a program that allowed overseas investments of less than US$3 million to be approved at the local government level rather than through the lengthy and complicated process of applying to Beijing. (Source: China Economic Review, February 2004)

� Domestic companies can develop business in a new market, exploit benefits of economies of scale, or even acquire valuable resources and strategic assets in the form of outward FDI. Moreover, local enterprises can make use of their capital to buy a stake in an overseas institution for raising returns and gaining expertise of management. (Source: China Economic Review, February 2004)

77

China’s Foreign Exchange ReservesChina’s Foreign Exchange Reserves

1.2

1.4

1.6

1.8

US$ trillions

May 2008: $1.797 trillion

88

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008

China’s Foreign Exchange ReservesChina’s Foreign Exchange Reserves

Foreign exchange reserves

(US$ billions)

GDP(US$ billions)

Ratio of foreign

exchange to GDP(%)

Ratio of foreign

exchange to imports (%)

1999 155 1,083 14 93

2000 166 1,198 14 74

99

2000 166 1,198 14 74

2001 212 1,325 16 87

2002 286 1,454 20 97

2003 403 1,641 25 98

2004 610 1,932 32 109

2005 819 2,234 37 124

2006 1,066 2,627 41 135

2007 1,528 3,240 47 160

Sources: National Bureau of Statistics of China, State Administration of Foreign Exchange, and World Economic Outlook Database 2008.

(US$ billions)Year

Established

Standard Chartered, October 15,

2007

Wall Street Journal,

September 10, 2007

Breakingviews.com,

October 25, 2007

Abu Dhabi Investment Auth., UAE 1976 625 875 650

GIC, Singapore 1981 215 330 100 - 330

Government Pension Fund, Norway 1990 322 300 322

Top Ten Sovereign Wealth FundsTop Ten Sovereign Wealth Funds

1010

China Investment Co., China 2007 200 200 200 - 400

Stabilization Fund, Russia 2004 128 100 128

Temasek Holdings, Singapore 1974 108 100 108

Kuwait Investment Authority, Kuwait

1953 213 70 213

Australian Future Fund, Australia 2004 42 40 30

Permanent Reserve Fund, U.S. 1976 40 37 40

Brunei Investment Authority, Brunei 1983 30 30 30

Total 1,923 2,082 1,821 – 2,251

Initial Capitalization of CICInitial Capitalization of CIC$78 Billion of $200 Billion Special Treasury Bonds$78 Billion of $200 Billion Special Treasury Bonds

China Agricultural China Agricultural BankBank

Ministry of FinanceMinistry of Finance

China Investment China Investment

(1) Special Treasury Issue

(4) Inject Capital

Short–Term Money Market

China Investment China Investment CorporationCorporation

People’s Bank of ChinaPeople’s Bank of China

(3) Special Treasury Sale (entire amount)

Sale of Special Treasuries (PBC operations)

(2) Use Yuan to Buy Foreign Reserves

Source: Nomura Capital Market Review, Vol. 10, No.4.

1111

Investment Plan of CICInvestment Plan of CIC

� 1/3 of the capital would be used to purchase Huijin, founded in 2003, that now controls China’s major state-owned commercial banks: ICBC, CCB, BOC and ABC.

� 1/3 of the capital would be invested in global financial markets.1. May 22, 2007 - invested 3 billion U.S. dollars in the U.S. private equity firm

Blackstone Group.Blackstone Group.2. Nov. 20, 2007 – invested about 100 million U.S. dollars in the IPO of the

China Railway Group in Hong Kong.3. Dec. 19, 2007 - invested 5 billion U.S. dollars in Morgan Stanley.

� The remainder would replenish the capital of the Agricultural Bank of China and China Development Bank.

- Li Yong, Vice Minister of Finance July 7, 2007

1212

Most Bank Loans Go to State Owned EnterprisesMost Bank Loans Go to State Owned Enterprises

Contribution to GDP

State-owned

enterprises23%

Share in corporate bank loans

State-owned enterprises

35%

Private and foreign

enterprises27%

1313

Collective enterprises

6%

Private and foreign

enterprises52% Share-

holding enterprises

19%

35%

Shareholding enterprises

27%

Collective enterprises

11%

Outward Nonfinancial Direct Investment Outward Nonfinancial Direct Investment FlowFlow

19821982--20072007

12

14

16

18

20US$ billions

1414

0

2

4

6

8

10

1982 1987 1992 1997 2002 2007

Sources: UNCTAD and Chinese Ministry of Commerce.

Note: China released its own ODI figures beginning in 2002. Prior data are only available from UNCTAD.

Outward Foreign Direct Investment Flow Outward Foreign Direct Investment Flow of Selected Countriesof Selected Countries

20062006

119.5115.7

101.1

80

100

120

140US$ billions

1515

45.8 45.6 42.9 39.7 38.8 34.1 32.625.9 21.2

13.16.2 4.3 2.5

0

20

40

60

Netherla

ndFra

nce

United

King

dom

Japan

Germany

Swi tzerla

ndIta

lySpa

inCan

ada

Hong

Kong

Sweden

China

Russia

Mex

icoSou

th K

orea

Brazil

Source: Chinese Ministry of Commerce.

Outward Foreign Direct Investment Stock Outward Foreign Direct Investment Stock of Selected Countries of Selected Countries

December 2006December 2006

2,051

1,2381,500

2,000

2,500US$ billions

1616

967853

641

387 381 293159 118 118 91 120 72 36 28

0

500

1,000

United

Stat

es

United

King

dom

GermanyFra

nce

Nethe

r land

Japan

Spain

I taly

Austra

liaDen

mar

kIre

land

China

Russia

Brazil

South

Korea

Mex

ico


GDP and Composition of Outward GDP and Composition of Outward Investment Stock for Selected CountriesInvestment Stock for Selected Countries

Equity BondsUS$ Billions

GDP

Percent of GDP

Outward Portfolio Investment Stock

Other Outward Investment

Stock (including bank

loans)

Outward Direct

Investment Stock

Source: IMF, State Administration of Foreign Exchange, and US Bureau of Economic Analysis.

Note: 2007, except * denotes 2006 and ** denotes third quarter 2007.

US$ BillionsChina 3,240 3.32 0.58 6.81 12.53India* 915 2.62 0.04 0.04 2.15Brazil** 1,287 9.15 0.37 0.88 3.54Russia* 989 21.20 0.05 1.19 18.23United States 13,841 24.08 37.36 10.68 28.33Japan* 4,377 10.27 11.66 41.88 22.41Germany** 3,307 33.97 32.71 44.09 94.54United Kingdom 2,773 61.55 57.58 73.08 271.61

Percent of GDP

1717

China’s ODI Flow Is Relatively SmallChina’s ODI Flow Is Relatively Small

World: ODI flow/ GDP

3%

4%

5%

GDP: China/ World total

4%

5%

6%

Source: IMF and UNCTAD.

China: ODI flow/ GDP

0%

1%

2%

3%

1982 1986 1990 1994 1998 2002 2006

ODI flow:

China/ World total

0%

1%

2%

3%

1982 1986 1990 1994 1998 2002 2006

1818

China’s ODI Flow Is Relatively SmallChina’s ODI Flow Is Relatively Small

World: ODI

stock/ GDP20%

25%

30%

GDP: China/ World total

4%

5%

6%

Source: IMF and UNCTAD.

China: ODI

stock/ GDP

0%

5%

10%

15%

1982 1986 1990 1994 1998 2002 2006

ODI stock: China/ World total

0%

1%

2%

3%

1982 1986 1990 1994 1998 2002 2006

1919

Hong Kong and Caribbean OffHong Kong and Caribbean Off--shore Centers shore Centers Account for More Than 80 Percent of China’s Account for More Than 80 Percent of China’s

Nonfinancial ODI StockNonfinancial ODI Stock

Total ODI stock as of December 2006: US$ 75 billion

Europe3%

Africa3%

North America2%

Oceania1% Latin America

1%

Asia ex-HK

2020

3%Asia ex-HK8%

Caribbean off-shore centers

26%

Hong Kong56%


Note: Note: More than 12,000 Chinese companies have established firms in about 172 countries and regions by the end of 2007. (Source: http://chinareference.eu/cbn/news.php?action=fullnews&id=1365)

Outward Foreign Direct Investments by IndustryOutward Foreign Direct Investments by IndustryCumulative Flows, 2004Cumulative Flows, 2004--20062006

Oil, natural gas and other minerals

32%

Real estate1%Transportation,

warehousing & postal service

7%

Agriculture, forestry,

husbandry, fishery1%

Others3%

2121

32%

Business service and leasing

26%

Finance and banking

9%

Manufacture10%

Wholesale and retailing

11%


StateState--owned Enterprises Account for Majority of owned Enterprises Account for Majority of Outward Nonfinancial Foreign Direct Investment Outward Nonfinancial Foreign Direct Investment

ODI FlowODI Flow

16

20ProvincialCentral

US$ Billions

$12.2

$17.6

2222


0

4

8

12

2003 2004 2005 2006

$2.9

$5.5

$12.2

Composition of Outward Foreign Direct Composition of Outward Foreign Direct Investment FlowInvestment Flow

20062006

Incremental equity

investment24%

Other investment

45%

2323

Current profit reinvestment

31%


China’s Outward Investment ProceduresChina’s Outward Investment Procedures

ENTERPRISES

NDRCCheck firms’ capability

SAFE

Registration and transmit/ purchase foreign currency

BANK

Transmit/ purchase foreign currency

2424

ENTERPRISES

SAFECheck sourcesof funds

MOFCOMCheck condition of host country

currency verification

Source: Joseph Battat, Foreign Investment Advisory Services, IFC.

Chinese Completed M&As AbroadChinese Completed M&As AbroadJanuary 1995 January 1995 –– June 2008June 2008

25,000

30,000

35,000

US$ Mi l l ions

100

120

140

160

Number

Deal Value

Number of Deals

2525

0

5,000

10,000

15,000

20,000

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008June

0

20

40

60

80

100

Source: Dealogic.

Chinese Completed M&As Abroad:Chinese Completed M&As Abroad:Top 10 Countries by Number of DealsTop 10 Countries by Number of Deals

Total Number: 699, January 1995 Total Number: 699, January 1995 -- June 2008June 2008

Hong Kong 268

United States 78

Australia 47

Singapore 41

Germany3%

Japan

Indonesia3%

South Korea2%

United Kingdom3%

2626

Singapore 41

Canada 25

Japan 24

Germany 16

Indonesia 16

United Kingdom

14

South Korea 13

Other Countries

157

Australia9%

United States14%

Singapore8%

4%

Canada5%

Hong Kong49%

Source: Dealogic.

Chinese Completed M&As Abroad:Chinese Completed M&As Abroad:Top 10 Industries by Number of DealsTop 10 Industries by Number of Deals

Total Number: 699, January 1995 Total Number: 699, January 1995 -- June 2008June 2008

Computers & Electronics 84

Finance 69

Mining 59

Oil & Gas 59

Food & Beverage6%

Professional Services

6%

Construction/Building 7%

Computers & Electronics

2727

Oil & Gas 59

Telecom. 36

Consumer Products 35

Real Estate/Property 33

Construction/Building 32

Food & Beverage 28

Professional Services 28

Other Industries 236

Finance15%

Mining13%Oil & Gas

13%

/Building 7% Electronics17%

Telecom.8%

Consumer Products

8%

Real Estate/Property

7%

Source: Dealogic.

Chinese Completed M&As Abroad:Chinese Completed M&As Abroad:Top 10 Countries by Number of DealsTop 10 Countries by Number of Deals

Total Number: 699, January 1995 Total Number: 699, January 1995 -- June 2008June 2008C

ompu

ters

& E

lect

roni

csFi

nanc

e

Min

ing

Oil

& G

as

Tel

ecom

.

Con

sum

er P

rodu

cts

Rea

l Est

ate/

Prop

erty

Con

stru

ctio

n/B

uild

ing

Food

& B

ever

age

Prof

essi

onal

Ser

vice

sO

ther

Indu

str i

esPe

rcen

t of T

otal

Num

ber

of D

eals

Hong Kong 13.4 18.3 0.7 1.5 0.0 6.0 7.8 9.3 3.0 3.7 36.2 38.3 268

United States 25.6 5.1 0.0 3.8 0.0 2.6 1.3 0.0 0.0 5.1 56.4 11.2 78

2828Source: Dealogic.

Australia 0.0 2.1 51.1 12.8 0.0 0.0 2.1 6.4 4.3 0.0 21.3 6.7 47

Singapore 7.3 4.9 0.0 4.9 0.0 0.0 9.8 2.4 9.8 4.9 56.1 5.9 41

Canada 4.0 4.0 44.0 4.0 0.0 0.0 0.0 4.0 4.0 4.0 32.0 3.6 25

Japan 29.2 4.2 0.0 0.0 0.0 4.2 0.0 0.0 4.2 12.5 45.8 3.4 24

Germany 6.3 0.0 0.0 0.0 0.0 6.3 0.0 6.3 0.0 12.5 68.8 2.3 16

Indonesia 0.0 0.0 12.5 43.8 0.0 0.0 18.8 0.0 6.3 0.0 18.8 2.3 16

United Kingdom 7.1 7.1 28.6 7.1 0.0 0.0 0.0 0.0 0.0 14.3 35.7 2.0 14

South Korea 46.2 7.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 46.2 1.9 13

Top Ten Countries Total

13.8 11.1 7.9 4.4 0.0 3.7 5.5 5.7 3.1 4.4 40.2 77.5 542

699 Total Number of Deals

Chinese Completed M&As Abroad: Chinese Completed M&As Abroad: Top 10 Countries by Deal Value Top 10 Countries by Deal Value

Total: US$99,870 Million, January 1995 Total: US$99,870 Million, January 1995 -- June 2008June 2008

United Kingdom 20,656

Hong Kong 20,557

Singapore 8,291

US$ Millions

Australia3% Nigeria

3%

France5%

Russian Federation

2929

United States 6,614

Kazakhstan 6,602

South Africa 5,716

Russian Federation 4,192

France 3,932

Australia 2,796

Nigeria 2,771

Other Countries 17,743

Source: Dealogic.

Hong Kong25%

United States8%

Singapore10%

United Kingdom26%

Kazakhstan8%

South Africa7%

Federation5%

Chinese Completed M&As Abroad: Chinese Completed M&As Abroad: Top 10 Industries by Deal Value Top 10 Industries by Deal Value

Total: US$99,870 Million, January 1995 Total: US$99,870 Million, January 1995 -- June 2008June 2008

US$ Millions

Oil & Gas 27,419

Finance 18,574

Mining 18,522


5%

Chemicals1%

Auto/Truck1%

Real Estate/Property

1%

3030

Utility & Energy 7,073

Transportation 6,438

Telecom. 5,110


5,031

Chemicals 1,264

Real Estate/Property 1,246

Auto/Truck 1,208

Other Industries 7,983

Source: Dealogic.

Finance20%

Mining20%

Utility & Energy8%

5%Telecom.

6%

Transportation7%

Oil & Gas31%

Chinese Completed M&As Abroad: Chinese Completed M&As Abroad: Top 10 Industries by Deal ValueTop 10 Industries by Deal Value

Total: US$99,870 Million, January 1995 Total: US$99,870 Million, January 1995 -- June 2008June 2008O

il &

Gas

Fina

nce

Min

ing

Util

ity &

Ene

rgy

Tra

nspo

r tat

ion

Tel

ecom

.

Com

pute

rs &

Ele

ctro

nics

Che

mic

als

Rea

l Est

ate/

Prop

erty

Aut

o/T

ruck

Oth

er In

dust

r ies

Perc

ent o

f Tot

al

Dea

l Val

ues (

US$

Mill

ions

)

United Kingdom 9.9 14.4 74.0 1.2 0.0 0.0 0.0 0.1 0.0 0.4 0.0 0.21 20,656

Hong Kong 2.6 16.0 0.1 13.8 11.6 0.0 6.3 2.4 4.4 0.1 42.7 0.21 20,557


Hong Kong 2.6 16.0 0.1 13.8 11.6 0.0 6.3 2.4 4.4 0.1 42.7 0.21 20,557

Singapore 3.3 0.2 0.0 44.7 43.4 0.0 0.1 0.0 0.6 0.0 7.8 0.08 8,291

United States 2.8 50.0 0.0 0.0 0.0 0.0 30.5 0.2 0.2 1.5 14.7 0.07 6,614

Kazakhstan 100.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.07 6,602

South Africa 0.0 96.0 3.5 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0.4 0.06 5,716

Russian Federation 99.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.0 0.0 0.04 4,192

France 74.6 0.0 0.0 0.0 0.0 0.0 0.0 12.8 0.0 0.0 12.6 0.04 3,932

Australia 49.6 0.7 17.7 8.4 0.0 0.0 0.0 6.2 0.5 0.1 16.8 0.03 2,796

Nigeria 100.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.03 2,771

Top Ten Countries Total

25.4 18.4 19.5 8.6 7.3 0.0 4.0 1.5 1.2 0.3 13.9 0.82 82,127

99,870Total Deal Values

Chinese Completed M&As Abroad: Chinese Completed M&As Abroad: Primary Payment Method by Deal Value Primary Payment Method by Deal Value

January 1995 January 1995 -- June 2008June 2008

US$ Millions

Cash Only 92,993

Share Only2%

Cash & Shares

3%

3232

Share Only 1,544

Cash & Shares 2,539

Other 2,794

Total 99,870

Source: Dealogic.

Cash Only95%

Chinese Completed M&As Abroad: Chinese Completed M&As Abroad: Acquiror Ownership Status by Deal ValueAcquiror Ownership Status by Deal Value

January 1995 January 1995 -- June 2008June 2008

US$ Millions

Private (Not listed)

40,244

Public (Listed) 36,058

Other1%Government

(Not listed)23% Private

(Not listed)

3333

Public (Listed) 36,058

Government (Not listed)

22,580

Not applicable 971

Wholly-owned Subsidiary

10

Joint Venture 6

TotalTotal 99,870

Source: Dealogic.

Public (Listed)36%

23%(Not listed)

40%

Top 30 Chinese M&As Abroad by Deal ValueTop 30 Chinese M&As Abroad by Deal ValueJanuary 1995 January 1995 –– June 2008June 2008

US$ Millions

Completion Date

Acquiror TargetTarget

NationalityTarget

Industry

Cash Only (Y/N)

14,316 1-Feb-08Aluminum Corp of

China;Alcoa Inc

Rio Tinto plc (12%)United

KingdomMining Y

5,490 15-Feb-08Industrial &

Commercial Bank of Standard Bank

South Africa Finance Y

3434

5,490 15-Feb-08 Commercial Bank of China - ICBC

Standard Bank Group Ltd (20%)

South Africa Finance Y

4,180 26-Oct-05China National

Petroleum Corp -CNPC

PetroKazakhstan Inc

Kazakhstan Oil & Gas Y

3,652 10-Aug-06China Petroleum &

Chemical Corp -SINOPEC

Udmurtneft OAO (99.49%)

Russian Federation

Oil & Gas Y

3,425 15-Dec-06 Bank of China LtdSingapore Aircraft Leasing Enterprise

Pte Ltd (SALE)Singapore Transportation Y

Source: Dealogic.


US$ Millions

Completion Date


NationalityTarget

Industry

Cash Only (Y/N)

3,117 24-Mar-08China Huaneng

GroupTuas Power Ltd Singapore

Utility & Energy

Y

3,000 14-Aug-07China Investment Blackstone

United States Finance Y

3535

3,000 14-Aug-07Corp Group LP (10%)

United States Finance Y

2,981 14-Aug-07China Development

BankBarclays plc

(2.64%)United

KingdomFinance Y

2,935 4-Apr-08State

Administration of Foreign Exchange

Total SA (1.6%) France Oil & Gas Y

2,692 19-Apr-06China National

Offshore Oil Corp -CNOOC

Oil & Gas Assets (Akpo Offshore Oil & Gas Field

in Nigeria)

Nigeria Oil & Gas Y

Source: Dealogic.


US$ Millions

Completion Date


NationalityTarget

Industry

Cash Only (Y/N)

2,440 28-Nov-07Ping An Insurance

(Group) Co of China Ltd

Fortis Group (4.18%) Belgium Finance Y

2,106 29-Jan-97

China International Trust and

Investment Corp -China Light & Power Co

Ltd (20%)Hong Kong

Utility & Energy

Y


2,106 29-Jan-97Investment Corp -

CITICLtd (20%)

Hong KongEnergy

Y

2,044 15-Apr-08State

Administration of Foreign Exchange

BP plc (1%)United

KingdomOil & Gas Y

1,910 29-Dec-06 CITIC GroupOil & Gas Assets (Kazakh

Oil & Gas Assets)Kazakhstan Oil & Gas Y

1,750 2-May-05 Lenovo Group Ltd

International Business Machines Corp - IBM (Personal Computer

Business)

United States

Computers &

ElectronicsN


US$ Millions

Completion Date


NationalityTarget Industry

Cash Only (Y/N)

1,660 9-Feb-98China Telecom

Hong Kong (Group) Ltd

Hong Kong Telecommunications

Ltd (7.6%)Hong Kong Telecom. Y

1,420 21-Feb-06Andes Petroleum

Co

Oil & Gas Assets (Oil & Pipeline Interests

in Ecuador)Ecuador Oil & Gas Y


Coin Ecuador)

1,248 29-Dec-06China Construction Bank Corp - CCB

Bank of America (Asia) Ltd

Hong Kong Finance Y

1,200 29-Dec-07China Cosco

Holdings Co Ltd

Golden View Investment Ltd

(48.93%)Hong Kong Transportation Y

1,186 6-Jun-97China Telecom

(Hong Kong) Ltd

Hong Kong Telecommunications

Ltd (5.5%)Hong Kong Telecom. Y


US$ Millions

Completion Date


NationalityTarget

Industry

Cash Only (Y/N)

1,016 1-Apr-05China Network

Communications Group Corp

PCCW Ltd (20%) Hong Kong Telecom. Y

China Petroleum & Oil & Gas Assets (Oil Oil &


923 13-Jun-06China Petroleum &

Chemical Corp -SINOPEC

Oil & Gas Assets (Oil Blocks 17, 18 & 15 in

Angola)Angola

Oil & Gas

Y

850 21-Sep-06

China Petrochemical Corp;

Oil & Gas Technology Fund Inc

Omimex de Colombia Ltd (50%)

ColombiaOil & Gas

Y

796 11-Nov-06China Vision Resources

LtdAnglo American plc

(1.127%)United

KingdomMining Y

789 24-Jul-07Aluminum Corp of China

Ltd - CHALCOPeru Copper Inc

(90.03%)Canada Mining Y


US$ Millions

Completion Date


NationalityTarget

Industry

Cash Only (Y/N)

650 6-Sep-01

Beijing Orient Electronics Group

Co Ltd;Cando Corp

Hyundai Display Technology Inc -Hydis (80.1%)

South KoreaComputers

& Electronics

Y

697 18-Jul-00Huaneng Power

Shandong Huaneng Power Development Hong Kong

Utility & Y


697 18-Jul-00Huaneng Power International Inc

Power Development Co Ltd

Hong KongUtility & Energy

Y

625 28-Sep-06 Air China LtdCathay Pacific Airways Ltd

(9.14%)Hong Kong

Transportation

Y

592 22-Apr-02China National

Offshore Oil Corp (CNOOC)

Repsol YPF SA (Indonesian assets)

Indonesia Oil & Gas Y

582 28-Jan-08Industrial &

Commercial Bank of China - ICBC

Seng Heng Bank Ltd (79.933%)

Macao Finance Y

China's International Investment PositionChina's International Investment Position

US$ Billion 2006 2007 2006 2007

Net Position 611 1,022 B. Liabilities 1,033 1,266

A. Assets 1,644 2,288 1. Foreign Direct Investments 613 742

1.Direct Investments Abroad 91 108 2. Portfolio Investment 121 143

2. Portfolio Investment 229 240 2.1 Equity Securities 107 125

2.1 Equity Securities 2 19 2.2 Debt Securities 14 18

2.2 Debt Securities 228 221 3. Other Investments 300 381

Source: State Administration of Foreign Exchange.

3. Other Investments 252 406 3.1 Trade Credits 104 132

3.1 Trade Credits 116 142 3.2 Loans 99 103

3.2 Loans 67 89 3.3 Currency and Deposits 59 98

3.3 Currency and Deposits 47 50 3.4 Other Liabilities 38 47

3.4 Other Assets 21 126

4. Reserves Assets 1,073 1,535

4.1 Monetary Gold 4 5

4.2 Special Drawing Rights 1 1

4.3 Reserves Position in the Fund 1 1

4.4 Foreign Exchange 1,066 1,528

4040

Geographical Distribution of GDP and Financial Assets20062006

Public Private Total

World 48,434 5,092 50,827 25,781 43,420 69,201 74,435 194,463 401 100

European Union

13,658 253 13,069 7,693 15,499 23,192 37,736 73,997 542 38

United States 13,195 55 19,569 6,234 20,816 27,050 10,203 56,822 431 29

US$ BillionsBank Assets

Total Financial

Assets

Total Financial

Assets Share of

GDP

Total Financial

Assets Share of the

World

Debt SecuritiesGDPForeign

Exchange Reserves

Stock Market Capitalization

Source: International Monetary Fund.

United States 13,195 55 19,569 6,234 20,816 27,050 10,203 56,822 431 29

Japan 4,377 880 4,796 6,751 1,973 8,724 6,590 20,110 459 10

Emerging Asia 6,271 2,272 6,857 2,014 1,495 3,508 8,845 19,210 306 10

Emerging Latin America

2,953 311 1,454 1,100 475 1,575 1,551 4,580 155 2

Emerging Europe

2,760 606 1,873 640 111 750 1,214 3,837 139 2

Emerging Middle East

1,328 247 657 38 61 99 998 1,755 132 1

China 2,645 1,068 2,426 791 422 1,213 6,017 9,656 365 5

4141

Public Private Total

China 3,240 1,530 4,479 1,143 583 1,725 7,201 13,405 414

India 1,135 267 3,479 417 79 496 878 4,853 427

Bank Assets

Total Financial

Assets

Total Financial

Assets Share of

GDP

US$ BillionsDebt SecuritiesStock Market

Capitalization

Foreign Exchange Reserves

GDP

Distribution of GDP and Financial AssetsDistribution of GDP and Financial Assetsfor Selected Countries for Selected Countries

2007 2007

Source: International Monetary Fund.

India 1,135 267 3,479 417 79 496 878 4,853 427

Brazil 1,314 179 1,370 749 327 1,076 1,578 4,023 306

Russia 1,305 464 1,329 28 104 132 731 2,192 168

United States 13,841 60 19,922 6,594 23,564 30,158 13,898 63,978 462

Japan 4,380 953 4,664 7,148 2,102 9,251 10,287 24,202 553

Germany 3,178 44 2,105 1,721 4,084 5,805 6,164 14,074 443

United Kingdom 2,773 49 3,852 915 3,024 3,940 9,680 17,472 630

4242

china’s investment practices, patterns, and strategies

Documents