King & Wood Mallesons

Asia-Pacific 100 position: 3

2013 Chinese outbound investment trends overview — energy and resources M&As

By Xiong Jin, Robin Teow and Sun Rui

According to statistics released by China’s Ministry of Commerce, Chinese outbound investment will continue its robust upward trend during the latter half of 2013, with energy- and resources-related deals dominating the scene. In 2012, China’s outbound direct investment reached a record high of $87.8bn, making it for the first time one of the top three outward investors during the period. Of that amount, $13.54bn flowed to the mining industry and more than $1bn to the energy- and resources-related industries, in particular the production and supply of electricity, steam, gas and water.

Before closing what is likely to be yet another record-breaking year, this article attempts to summarise some of the latest trends and developments affecting Chinese outbound investment into the energy and resources sector generally from a geographical perspective, as well as the forces shaping such trends, and to discuss some of the major challenges and risks facing Chinese investors who are riding or wish to hop on the wave of globalisation.

China has continued to maintain its great interests in Africa, thanks largely to the abundant energy and natural resources untapped in this continent and, increasingly, the potentially huge market for competitively priced Chinese industrial products. Nonetheless, despite the existence of individual opportunities in this part of the world, risky environments, a lack of technology and low per-capital income levels make doing business difficult for foreign investors. By way of illustration, Angola, Nigeria and Kenya are ranked in the bottom three, while South Africa ranked 49, in the China Going Global Investment Index, which balances opportunities against risks for 67 countries, recently published by Economist Intelligence Unit…

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