Capital outflows from China

Abstract

Following the success in opening the economy and attracting inward foreign direct investment, China has rapidly become an important source of outward foreign direct investment (ODI) and portfolio investments in recent years. Since China adopted a Going Global strategy, the stock of Chinese ODI has tripled. China’s outward investments are quite small compared with the inward flows. The change of ODI forms, structure and destinations has made China more and more similar to developed countries. Chinese ODI has accumulated in the service sector and high-tech manufacturing. More recently, China’s financial institutions are starting to play a more substantial role in the foreign financial sector. With the concentration of Chinese ODI in foreign advanced sectors, a lot of China’s funds flow into resource sectors in the developing countries. This double-track approach to outward foreign investment is probably beneficial for China’s economic development and is favourable to the process of catching-up with the developed countries.