Ministry: Emerging risks require investors to make better preparations

China's outbound direct investment will maintain a robust growth trend in the long run despite a slowdown in the first half of this year, the Ministry of Commerce said on Friday.

"Regarding the development trend, the steady and fast growth momentum of China's outward investment cooperation will not change in the long run," the ministry said in a statement on its website.

For the full year, ODI is likely to rise 10 percent, supported by "the improvement of the Chinese economy in the second half of this year, the acceleration of reforms in the outbound investment mechanism and the closing of some big cross-border projects", the ministry said.

Chinese project contractors in overseas markets will probably achieve a 5 percent increase in their new contracts by value and cumulative turnover this year, boosted by strong growth potential in Africa and emerging markets such as Latin America and Oceania, according to the ministry.

"The robust growth of China's outbound direct investment will surely not change as current economic developments demand that domestic companies use resources in global markets. Meanwhile, a slow world economic recovery is driving many economies to seek foreign investment to boost economic growth and employment," said Zhou Mi, a researcher at the Chinese Academy of International Trade and Economic Cooperation.

He said that the slowdown in the first half was caused by a high base of comparison, with some especially large projects agreed on in the first half of last year.

In the January-June period, ODI decreased 5 percent to $43.34 billion. Asia and Latin America continued to attract the largest amount of about 74.1 percent of the total.

Investment in the European Union surged 221.7 percent while spending in Russia went up 109.5 percent and that in Japan expanded 100 percent, according to the ministry.

"Chinese enterprises are increasingly understanding the importance of overseas investment for long-term development. This has led to greater diversification in the industries involved in China's outbound direct investment, a new feature in recent years," Zhou said.

He added that some risks had become prominent for Chinese investors in recent years, which demanded greater preparation.

"Security concerns, such as the situation in Libya and Iraq, became very prominent in the past one or two years, dealing a heavy blow to investors. In addition, natural disasters and diseases also had a severe impact on Chinese companies, a new trend in recent years.

"The global economic situation, including the development of the EU debt crisis, also demands that Chinese investors take precautions before entering an overseas market," Zhou said.

The ministry said in the statement that it is improving the policies supporting China's outbound investment. Regulations are undergoing reforms to shift from approval to registration.

Investment plans in some key countries will be compiled to provide more guidance for Chinese investors. The risk evaluation and alert system will also be strengthened, said the ministry.

On April 9, the ministry held the first meeting with the African Union regarding cross-border and regional infrastructure construction.

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