BEIJING (AFP) — China's overseas investment more than doubled in the first half of 2008, the government said Thursday, as the energy-hungry nation sought to secure resources globally to fuel its economic boom.
Non-financial direct outward investment hit 25.7 billion dollars in the first six months of the year, 2.3 times the level recorded in the same period last year, Assistant Minister of Commerce Wang Chao told reporters.
"The Chinese government takes pains to guide and encourage companies to 'go out'," Wang said. "China's outward investment will enter into a new phase of fast development."
The figure for the first six months was already bigger than for all of 2007, when total Chinese investment overseas reached 18.7 billion dollars, according to government data.
Non-financial investment refers to investment made by companies other than banks, insurers and securities firms.
Analysts said a key factor behind the dramatic surge was rising international commodities prices, giving Chinese companies an incentive to go directly to the source for raw materials.
"If you gain a stake in a seller of raw materials via acquisition, you can certainly get the resources you need at a relatively low price," said Li Huiyong, an economist with Shenyin Wanguo Securities in Shanghai.
With forex reserves of 1.8 trillion dollars and growing, China is keenly looking abroad to acquire resources to fuel an economy that has maintained double-digit growth in five consecutive years.
In February, state-controlled aluminium company Chinalco joined US-based Alcoa in buying nine percent in Australia's Rio Tinto for 14 billion dollars in an attempt to ramp up China's bargaining power in iron ore price talks.
Chinalco's contribution was the largest overseas investment ever made by a Chinese firm.
Chinese overseas investment also benefited from a strengthened currency combined with falling asset prices abroad.
"There were some pretty good opportunities in the first half," Sun Mingchun, a Hong Kong-based economist with Lehman Brothers, told AFP. "Prices of companies came down with drops in global stock markets."
But growing financial turmoil at home and abroad also triggered official concerns of growing risks to Chinese investors, with Beijing on Tuesday warning state-owned companies to exercise extreme care when investing.
However, experts said the trend for China to pour more cash to acquire global assets would not change despite the more cautious government attitude.
"The huge surplus in China's international balance is unchanged and (the government) still looks to divert capital out of the country," Sun said.
"Both state-owned enterprises and China's private companies have their own need as well to expand business and production globally when they develop into a certain scale."
The government announced earlier this month that foreign direct investment into China grew by 45.6 percent in the first half to 52.4 billion dollars.
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