China's outward direct investment (ODI) remained largely stable in 2022 while overseas M&As picked up, an industry report revealed on Thursday.
ODI reached $146.5 billion last year, up 0.9 percent year-on-year, while the non-financial ODI reached $116.9 billion, up 2.8 percent on a yearly basis, according to the latest report by consulting firm Ernst & Young (EY).
Outbound investment in some industries grew relatively quickly, such as wholesale and retail, manufacturing, as well as leasing and business services, up 19.5 percent, 17.4 percent and 5.8 percent year-on-year respectively.
Non-financial ODI in the countries and regions along the Belt and Road Initiative routes increased 3.3 percent to $21.0 billion, representing 17.9 percent of the total over the period. The investments were made mainly in the members of Association of Southeast Asian Nations (ASEAN), Pakistan, the United Arab Emirates, Serbia and Bangladesh.
"In 2022, the economy of China as well as the world economy faced lots of challenges brought with increased geopolitical complexity such as energy crisis and inflation," Loletta Chow, global leader of EY China Overseas Investment Network, said.
"A majority of key economies, especially advanced economies, might see further reduction in economic growth this year. China might steadily revive its economy as it optimized pandemic prevention and control. This might be followed by a gradual recovery of cross-border investment by Chinese enterprises, though caution is needed in view of geopolitical risks in some areas and the growing macroeconomic uncertainty," Chow said.
The global economic growth for 2023 is projected a decrease to 2.9 percent from 3.4 percent in 2022, based on the latest estimates by International Monetary Fund (IMF). The IMF revised China's growth outlook sharply higher for 2023 to 5.2 percent from 4.4 percent in October.
Chinese overseas M&As reached a historic low in terms of value in 2022, reaching $28.7 billion, down 52 percent year-on-year. Investment sentiment becoming increasingly cautious following the impact created by global economic dynamics and, China's pandemic policies were cited as caused of lower activity, while the value of more deals being undisclosed affected the statistical results, according to the EY report.
However, deal volumes in some regions and sectors increased as activity picked up compared to the previous year.
By deal value, 55 percent of the total deals took place in three main sectors, namely Technology, Media and Telecommunications (TMT), health care and life sciences, and real estate, hospitality and construction. Mining and metals turned out to be the only sector to see growth last year to $3.5 billion, recording an increase of 33 percent on a yearly basis by value, mainly in the areas of lithium mining and gold mine operation.
Asia was still the top destination for China overseas M&As by both value and volume, accounting for 37 percent and 34 percent of the total, respectively. Four out of the top 10 investment destinations of China overseas M&As were situated in Asia, namely Singapore, Japan, South Korea and Indonesia, which collectively account for nearly 80 percent of the total value in Asia.
