15. China’s outward Foreign Direct Investment (FDI).

As of the end of 2012, China’s accumulated stock of outward FDI was $502.8 billion.[1]

Although China’s accumulated total of outward FDI (i.e., its OFDI stock) is still small compared with many other imperialist countries, it is larger than that of Russia and is growing at a faster rate than that of all other imperialist or sub-imperialist countries.

Figure 15.1: Comparing China’s Outward FDI “Stock” to That of Other Countries[2]

[In billions of U.S. dollars]


Total OFDI Stock (2011)

New OFDI Flow in 2012

Total OFDI

Stock (2012)

% Increase in Stock in 2012



- 2.8




 424.8 62.4  502.8  18.4












 109.5  8.6  118.2  7.9


 519.7  29.8  535.0  2.9


 955.9  22.5




 361.5  28.4  387.2  7.1
 S. Africa  97.1  3.0  111.8  15.1










Total OFDI stock means the current value of all outward FDI flows up through the end of the year mentioned. The OECD figure for Brazil in 2012 seems quite inconsistent with the fact that Brazil had negative “outflows” of OFDI in both 2011 and 2012. (However, for all the countries the total stock amount for 2012 is not a simple addition of the 2011 total with the new flow in 2012, because the existing stock can also change in value, such as through inflation.) The percentage increase in column (d) is derived by: [column (c) – column (a)] / column (a).


China is still way behind most of the other imperialist countries in total “stock” of outward FDI for the simple reason that it got a much later start in accumulating these foreign assets. But its rate of growth of such assets—at more than twice the rate of growth of U.S. outward FDI stocks—is now very rapidly closing the gap.

How very recent the accumulation of a significant amount of outward FDI has been for China can be seen in Figure 15.2. China began to export capital in a very tiny way in the 1980s. This small outflow picked up just a bit in the 1990s, but it wasn’t until the new century that it really began to jump up in a major way. At first the target destinations were mostly in Southeast Asia. And from the start most of the outward FDI was being done by Chinese state-owned enterprises (SOEs).[3] One notable exception was the acquisition of IBM’s personal computer unit by the then private Lenovo Corporation in 2005.[4] In mid-2013 Lenovo became the largest computer company in the world.[5]

Figure 15.2 China’s Early Outward Foreign Direct Investment
(Yearly figures, 1979-2006)

Direct Investment ( yearly figures, 1979-2006)

Starting around 2005 China’s export flow of capital in the form of outward foreign direct investment took a qualitative leap upward, and since then it has been growing enormously, reaching, as we mentioned, $62.4 billion in 2012 alone.

China’s outward FDI is being sent to all parts of the world. The top four countries in recent years have been Australia, the U.S., Canada and Brazil (see chart on the next page).[7]

In Australia Chinese investments were first especially heavy in mining, focusing in particular on iron ore, and in oil, gas and other natural resources. More recently in Australia, however, China has been diversifying and investing in food, agribusiness, real estate, renewable energy industries, high tech and financial services.[8]

     While the graph below shows Canada in 3rd place as a target for China’s outward FDI for the whole 2005-12 period, for just the single year of 2012 Canada was the largest single target country. The Chinese oil giant CNOOC purchased Nexen, Inc., for $15 billion, and other Chinese investments in 2012 brought the total FDI flow into Canada that year to $23 billion.[9]

China's BiggestAs that one mammoth investment suggests, China’s FDI in Canada has mostly been in oil & gas, and mining. (China has been a major importer of nickel, copper, iron ore and potash from Canada.) While China’s investments in many countries (including Australia and the U.S.) have begun a major trend toward diversification, in Canada it is natural resources which remain the primary target.

In Brazil Chinese FDI investment was also primarily focused on the energy and metals industries through 2010. In 2011, however, only about 20% of the new FDI flow from China was in mining, with another 20% in agribusiness, and about 50% in the technology sector. China has begun making some major investments in Brazilian manufacturing and infrastructure areas, such as electricity production and distribution, a trend which China’s ambassador to Brazil recently indicated would be stepped up.[10]

China has been Brazil’s biggest trading partner since 2009. According to one source, from 1990 to 2009 Brazil represented 3.5% of China’s outward FDI, but this has really jumped up since then.[11] The stock of China’s FDI in Brazil before 2009 was only around $200 million, but increased to more than $21 billion in the 2009-2012 period.[12]

A world map showing the locations of China’s largest overseas investments since 2005 (i.e., those worth at least $100 million each), including some attempted acquisitions that have been blocked by the U.S. or other governments, is the Heritage Foundation’s China Global Investment Tracker Interactive Map at: http://www.heritage.org/research/projects/china-global-investment-tracker-interactive-map (The deep concern shown about China’s global expansion by reactionary ruling class think tanks such as the Heritage Foundation reflects the tremendous fears of the U.S. bourgeoisie with regard to China’s rise.)

What about China’s Foreign Direct Investments in the U.S.? Chinese FDI is going to all parts of the country, with the top five states so far being California, New York, Texas, Illinois and North Carolina. North Carolina has gotten continued special attention in part because of the large 2005 purchase by Lenovo of IBM’s personal computer business which is headquartered there (which encouraged other Chinese companies to also invest in the state), and because of special efforts by N.C. state authorities to lure more Chinese companies.[13]

Estimates of the stock (total amount) of Chinese FDI in the U.S. as of the end of 2012 vary from $23 billion to $50 billion, but the higher figure may include some investment which should actually be termed portfolio investment.[14]

Chinese direct investment in the U.S. would be much higher if the U.S. government had not blocked some major deals (supposedly for “security” reasons), and if Chinese companies had not come to view the U.S. as being a somewhat “difficult environment” to invest in, in part because of anti-Chinese attitudes here. “Many Chinese firms recall the uproar that sank the 2005 rejection of China National Offshore Oil Corp’s $18.5 billion attempt to buy U.S. energy company Unocal. That chilled Chinese investment in the United States for two years.”[15]

However, more recently China’s direct investment in the U.S. has nevertheless picked up considerably. Through May there was $10.5 billion in new direct investments in the U.S. in 2013. The planned purchase by Shuanghui International Holdings of the Smithfield Foods, the world’s largest hog producer, for nearly $5 billion will be the largest single Chinese acquisition in the U.S. so far, if it goes ahead. (There have been a few pious Congressional fears expressed about “the safety of the food supply”, but the deal is expected to go through.)[16]

Besides the large Smithfield and original Lenovo deals, some other major Chinese direct investments in the U.S. include the purchase of AMC Entertainment (the movie theater chain) for $2.6 billion in 2012; the purchase of the Volvo division from Ford by the Zhejian Geely Holding Group in 2010 for a total of $1.5 billion; the recent purchase of the bankrupt ion battery maker A123 by the Wanxiang Group for $256.5 million (which had Congressmen grumbling because the U.S. government had previously given the company $249 million in Recovery Act money to try to keep it going); the takeover of MiaSole, a California solar panel maker, by Hanergy Group, China’s largest privately owned renewable energy company, for a mere “tenth of its asking price in the midst of a downturn in the market”; Sinopec’s (China’s second-largest energy company) purchase of 1/3 of Devon Energy’s Oklahoma’s oil projects in 2012; the 2013 Sinopec purchase of 1/3 of the Chesapeake Energy Corp. for $2.2 billion; the 2010 purchase of 15% of the AES Corporation, one of the world’s leading electrical power companies; the purchase of the Goss Corporation in 2010, a major manufacturer of printing presses; the purchase of GM’s Nexteer Automotive unit in 2010 for $450 million; and many other substantial deals.[17]

Moreover, recently Chinese corporations and also individual rich Chinese investors have started buying U.S. real estate in a major way.[18] Some of these individual investments are huge! In October 2013 Fosun International, a Chinese conglomerate, agreed to buy a skyscraper near Wall Street for $750 million.[19]

Even more recently, Lenovo announced the purchase of Motorola from Google for $2.9 billion. Many view this purchase as being in considerable part for the acquisition of a well-known Western brand name as well as to expand further into the mobile phone market.[20] Also in January 2014 Lenovo announced the purchase of IBM’s low-end computer server business for $2.3 billion.[21]

There will likely be a much bigger surge of Chinese direct investment, and also portfolio investment in private companies, into the U.S. very soon. One major reason is that China is tired of just investing vast amounts of its foreign reserves in U.S. Treasury securities that presently pay extremely low rates of interest (because the Federal Reserve continues to flood the financial system with more money). The State Administration of Foreign Exchange (SAFE), the Chinese government agency which oversees foreign reserve investments, recently established an office in Manhattan to make alternative U.S. investments promising higher rates of return. This new office is separate from the office that buys U.S. government debt, and will focus on buying private equity, real estate, and other U.S. assets.[22] This follows a similar program already begun in Britain.[23]

Just how big will Chinese FDI in the U.S. get? One private research company, the Rhodium Group, estimates that by 2020—just 6 years away—it will balloon to between $100 billion and $400 billion.[24]

These rapidly expanding Chinese purchases of American companies are already raising major concerns within both the U.S. government and U.S. corporations that compete with China. “With every company they purchase, every piece of technology they get, the Chinese will be able to tip the playing field in a way that will really hurt the operations of American multinational corporations.”[25]

While not on the same scale of investment as in these major countries, China has also been buying up companies and resources in many smaller countries, all around the world. We will talk about its huge thrust into Africa in a separate section below, but China is also exporting capital heavily to Asian and Latin American countries and raiding their natural resources in a truly voracious way. We will just briefly mention a few example countries here by way of illustration of the general trend.

Laos, just south of China’s Yunnan province, is one of the poorest and most backward countries in the world. One-third of the country is still contaminated with unexploded American bombs left over from the endless carpet-bombing of the country during the U.S. war against the people of Indo-China. Hundreds of people each year still lose limbs when they come across cluster bombs. But after this American devastation of the country, Laos is now suffering a new kind of devastation caused by Chinese investment and plunder, especially in the north of the country, and to a lesser extent by Vietnamese investment. The country is being systematically stripped of its timber and mineral resources.[26]

The deforested area in Oudom Xai province and other areas of the northern part of Laos is now so large that it is being monitored from space by Swedish researchers. It is causing serious soil erosion, loss of biological diversity and is forcing large numbers of multi-ethnic poor people off the land—probably into urban slums in Laos’s capital Vientiane and a few other cities. A larger area of Laos is now owned by foreign investors (such as in Chinese-owned rubber plantations) than is devoted to rice farming in this very rural country![27]

In order to better move lumber, rubber, food crops, minerals and other goods north from Laos, China is building a $7.2 billion railroad from Kunming in Yunnan to Vientiane. This line is being financed by China’s Export-Import Bank, and about 50,000 workers (including at least 20,000 Chinese workers) are doing the job. How Laos will be able to pay for this rail line is hard to imagine, given that its entire GDP was only around $9.4 billion in 2012![28]

Laos is the victim of massive deforestation by Chinese and Vietnamese logging companies

Laos is the victim of massive deforestation by Chinese and Vietnamese logging companies, which is also causing serious soil erosion and forcing large numbers of people off the land.[29]

 This railroad will generate huge wealth for China, much more so than for Laos. It is important to China not only for expanding the exploitation of Laos, but actually for hugely expanding its operations in Southeast Asia more generally. The rail line will connect with the existing railroad from Vientiane to Bangkok—a very important center of trade—and then be extended to Dawei (and thus to Rangoon) in the Bay of Bengal in Myanmar.[30] This will provide a land route which bypasses the Malacca Straits, a potential choke point between China’s east coast and the Indian Ocean.

As for Laos itself, China has been granted authority by the Laotian government to operate a number of Special Economic Zones there. China has so many projects underway in the country (including building construction in Vientiane, and even the construction of a large “Chinatown” for over 100,000 Chinese people), that “Some Laotians, unhappy with the unmistakable Chinese presence, complain that their country is becoming little more than a province of China or, more slyly, a vassal state.”[31]

In Nepal Chinese investment so far is less rapacious. One reason is that China is in effect bribing Nepal with development projects in order to secure complete cooperation by Nepal’s government in suppressing any Tibetan refugee and independence movements operating there. (This is one of many examples of how Chinese political pressure is already being used in other countries.)

China is also planning to build a railroad from Tibet to Kathmandu in Nepal. The Lhasa-Shigatse railway is currently under construction and should be finished in 2014. China has told Nepal that as soon as that link is finished it will start on the Shigatse-Kathmandu segment.[32]

However, even before that rail link is started, China has already displaced India as the largest source of FDI coming into Nepal.[33] But India is still the largest trade partner with Nepal, and that may continue even after the completion of the China-Nepal railroad (because of the vast distances through Tibet and western China to the major Chinese industrial areas).

Neverthless, China’s activity and influence in Nepal has been rapidly increasing. China has been deepening its military ties with Nepal by providing weapons, other supplies and training to the reactionary Nepal Army.[34]

China’s FDI in Latin America has also been growing very rapidly, and not just in Brazil which we discussed earlier. One study in 2012 starts by stating that “Chinese investment in Latin America has exploded in recent years.” This study, which focused on Chinese mining investment in Peru, found that the negative impacts of Chinese companies operating there have not been “significantly worse” than that of other foreign or local capitalist corporations from the point of view of their economic, environmental and social impact.[35] (But what a ridiculous standard that is! It is like “defending” the Chicago Mafia gangsters as being “no worse” than the mob in New York!)

Trade between China and Latin America reached $261.2 billion in 2012.[36] That is just as much as Chinese trade with Africa, which gets more international attention. And Chinese investment to Latin America (including Brazil) exceeds its investment in Africa. Moreover, development loans from the China Development Bank and the Export-Import Bank of China since 2005 have actually exceeded that provided by the World Bank or the Inter-American Development Bank during that period.[37] China, by itself, and before the BRICS Development Bank even gets functioning in a significant way, is already more important for economic development in many parts of the world than is the World Bank! The sort of development underway, of course, is that which is in line with China’s own imperialist economic interests and profits.

Chinese companies are building many energy and infrastructure projects in Latin America, including a $4.7 billion project by China’s Gezhouba Corporation of building two new hydroelectric facilities in Santa Cruz, Argentina. Similarly the Chinese company SinoHydro is building a $2.2 billion hydroelectric project in Ecuador.[38]

Of course, much of Chinese investment in Latin America is for the purpose of acquiring bulk commodities and natural resources, such as Peru’s copper, Brazil’s iron ore, and Argentina’s soya crops. In recent years more that 64% of Chinese OFDI in Latin America has been focused on raw materials and commodities, though more diversification may now be occurring.[39]

China’s SOEs are responsible for as much as 87% of Chinese OFDI in Latin America, according to a study by Tufts University,[40] though it is very likely that this percentage is now falling from year to year as private Chinese corporations begin to export more and more capital.


[1] “FDI in Figures”, OECD, op. cit., Table 4.

[2] Source: “FDI in Figures”, OECD, op. cit., Tables 2 and 4. The OECD figure of $62.4 billion for China’s OFDI in 2012 may be in error. China’s official figure for 2012 exceeded $77 billion. [Economist, “China’s overseas investment”, Jan. 19, 2013.] This would mean that China’s OFDI stock is growing even faster than stated in the text!

[3] Officially China’s private corporations accounted for only 9.5% of China’s total outward FDI in 2012, though that was up from less than 4% in the two previous years. [Economist, “China’s overseas investment”, Jan. 19, 2013.] However, there is reason to believe that the amount of Chinese private investment overseas is being greatly understated by the Chinese government, as we will discuss in the section on Chinese investment in Africa.

[4] The Chinese Academy of Science, a state agency, later bought 28.6% of Lenovo in July 2009.

[5] As of the second quarter of 2013, when Lenovo surpassed HP. “PC sales decline 5 quarters in row”, San Francisco Chronicle, July 12, 2013. Lenovo was only the 4th largest computer company in the world just after it purchased IBM’s PC unit, so it has gained a lot of market share since then.

[6] Randall Morck, Bernard Yeung, Minyuan Zhao, “Perspectives on China’s Outward Foreign Direct Investment”, June 2007, figure 1. Online at: http://scholar.google.com/scholar_url?hl=en&q=http://www.researchgate.net/publication/5223340_Perspectives_on_China%27s_outward_foreign_direct_investment/file/32bfe5100cd8107544.pdf&sa=X&scisig=AAGBfm166mt8uM0u993N6BsDX8xQB5bSiQ&oi=scholarr

[7] Graph of Chinese capital export targets is from “China’s Overseas Investment”, Economist, Jan. 19, 2013, online at: http://www.economist.com/news/china/21569775-expanding-scale-and-scope-chinas-outward-direct-investment-odi-lay-hee-ho

[8] KPMY/Univ. of Sydney, “Demystifying Chinese Investment: China’s Outbound Direct Investment in Australia”, Aug. 2012, online at: http://www.kpmg.com/AU/en/IssuesAndInsights/ArticlesPublications/china-insights/Documents/demystifying-chinese-investment-2012.pdf And also, “Chinese looking to diversify Australian investments”, ABC News (Australia), June 12, 2013, online at:   http://www.abc.net.au/news/2013-06-12/chinese-looking-to-diversify-australian-investments/4747262

[9] “Canada top target for Chinese foreign investment last year”, iPolitics, Feb. 13, 2013, online at: http://www.ipolitics.ca/2013/02/13/canada-top-target-for-chinese-foreign-investment-last-year/

[10] “China Keen on Investing in Brazil Infrastructure, Manufacturing”, Wall Street Journal, May 10, 2013, online at: http://online.wsj.com/article/BT-CO-20130510-715152.html

[11] Hunt Kushner, “In Brazil’s Red Corner”, Foreign Policy Association, Dec. 31, 2012, online at: http://foreignpolicyblogs.com/2012/12/31/in-brazils-red-corner/

[12] See Wall Street Journal article from May 10, 2013, in a previous footnote.

[13] Paul Eckert, “Despite the politics, Chinese investment in U.S. grows”, Reuters, online at: http://www.reuters.com/article/2013/06/09/us-usa-china-investment-idUSBRE95805X20130609

[14] Ibid.

[15] Ibid.

[16] Ibid.

[17] These particular acquisitions, and some others, are discussed in Garrett Bruno & Alisa Wiersema, “Where’s the Money: Chinese Investments in U.S.”, ABC News, June 7, 2013, online at: http://abcnews.go.com/Politics/money-chinese-investments-us/story?id=19347795#.UdYGhKw7v0Y

[18] “Chinese Investors Pursue U.S. Property Deals”, New York Times, June 25, 2013, online at: http://www.nytimes.com/2013/06/26/business/global/chinese-investors-pursue-us-real-estate-deals.html?nl=todaysheadlines&emc=edit_th_20130626

[19] “China’s outward investment: The Second Wave”, Economist, Oct. 26, 2013, p. 72. The building is known as 1 Chase Manhattan Plaza, and was originally commissioned by David Rockefeller. The article compares the huge real estate investments that Japan made in the U.S. in the 1980s, many of which were ill-advised and money-losing ventures, with the current wave of Chinese investments, and concludes that “Chinese investors seem to be negotiating reasonable deals”.

[20] Chris Devonshire-Ellis, “Lenovo’s Purchase of Motorola an Exercise in Buying Brands”, China Briefing, Jan. 30, 2014, online at: http://www.china-briefing.com/news/2014/01/30/lenovos-purchase-of-motorola-an-exercise-in-buying-brands.html

[21] “Lenovo CEO hopes $5 billion buys pay off”, Bloomberg News report in the San Francisco Chronicle, Feb. 2, 2014, p. D-2.

[22] Lingling Wei & Carolyn Cui, “China is Seeking U.S. Assets”, Wall Street Journal, May 20, 2013, online at: http://online.wsj.com/article/SB10001424127887324787004578494632401290050.html See also: “China to Use Forex Reserves to Finance Overseas Investment Deals”, Bloomberg News, Jan. 14, 2013, online at: http://www.bloomberg.com/news/2013-01-14/china-to-use-forex-reserves-to-finance-overseas-investment-deals.html

[23] “China Quietly Invests Reserves in U.K. Properties”, Wall Street Journal, Feb. 24, 2013, online at: http://online.wsj.com/article/SB10001424127887323699704578323670119279066.html

[24] Peter Coy, “Give Me Your Yuan”, Bloomberg Businessweek, Aug. 5-11, 2013.

[25] Ian Bremmer, president of the Eurasia Group, a consulting agency, quoted in Peter Coy, “Give Me Your Yuan”, Bloomberg Businessweek, Aug. 5-11, 2013, p. 7.

[26] “The future of Laos: A bleak landscape”, Economist, Oct. 26, 2013, pp. 49-50. Online at: http://www.economist.com/news/asia/21588421-secretive-ruling-clique-and-murky-land-grabs-spell-trouble-poor-country-bleak-landscape

[27] Ibid.

[28] Jane Perlez and Bree Feng, “Laos Could Bear Cost of Chinese Railroad”, New York Times, Jan. 1, 2013, online at: http://www.nytimes.com/2013/01/02/world/asia/china-builds-a-railroad-and-laos-bears-the-cost.html?_r=0

[29] This photo of Laotian deforestation is from the Economist article cited in the next endnote.

[30] For a broader picture of the planned development of railroads in Southeast Asia see the Wikipedia entry Kunming-Singapore Railway at: http://en.wikipedia.org/wiki/Kunming%E2%80%93Singapore_Railway

[31] Ibid.

[32] See: “China pledges railway link to Nepal”, Phayul.com, Sept. 11, 2013, online at: http://www.phayul.com/news/article.aspx?id=33976   and http://en.wikipedia.org/wiki/Lhasa%E2%80%93Shigatse_Railway [Shigatse (or Xigaze) is the second largest city in Tibet.]

[33] Ananth Krishnan, “China is largest FDI source for Nepal, overtakes India”, The Hindu, Jan. 26, 2014, online at: http://www.thehindu.com/news/international/world/china-is-largest-fdi-source-for-nepal-overtaking-india/article5618081.ece

[34] “China, Nepal agree to deepen military ties”, The Hindu [India], July 25, 2013.

[35] Amos Irwin & Kevin P. Gallagher, “Chinese Investment in Peru: A Comparative Analysis”, Dec. 2012, online at: http://ase.tufts.edu/gdae/Pubs/rp/DP34IrwinGallagherDec12.pdf

[36] Fernando Menéndez, “The Trend in Chinese Investments in Latin America and the Caribbean”, China-US Focus, Dec. 19, 2013, online at: http://www.chinausfocus.com/finance-economy/the-trend-of-chinese-investments-in-latin-america-and-the-caribbean/

[37] “Latin America playing a risky game by welcoming in the Chinese dragon”, Guardian, May 30, 2013, online at: http://www.theguardian.com/global-development/poverty-matters/2013/may/30/latin-america-risky-chinese-dragon

[38] Fernando Menéndez, op. cit.

[39] Ibid.

[40] Ibid.

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