A View of the Chinese Global Investments · 2016. 12. 13. · 2012 September BAIC $ 300 Transport Autos Brazil G 2012 October JAC Motors $ 450 Transport Autos Brazil G 2012 November

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A View of the Chinese Global Investments

Jorge Arbache

Ministry of Planning and University of Brasilia

Brazil-China Innovation Dialogue 2016, November, 22, 2016

Non-official presentation

What is driving global trade relations?

• Services becoming increasingly tradable

• Services - 54% of global trade (TiVA) today; 75% by 2025

• Services - 66% of new FDI flows

• Global services market US$5.2 trillion; expected to reach US$14 trillion before 2030

• Servicification and digitization eras

• Manufacturing-services – synergetic and symbiotic relationship to create value


• New technologies of production and organization of production (modern manufacturing, artificial intelligence, 3D printers, robots, etc)

• Digitization is disrupting everything: the nature of goods, the universe of potential suppliers and customers, methods of delivery, capital and scale to operate globally, and capacity needs


• Digitization catalyzes rapid growth by creating network effect and reducing marginal costs -- hyperscale platforms enjoy massive operating leverage – Google, Apple, Amazon, Alibaba, Baido…

• Digital powerhouses are taking advantage of their hyperscaleplatforms to move from search and networking into new sectors – self-reinforcing, endogenous move


• Business models, IT and service technologies lifecycles –shortening very rapidly

• Digital economy:• Large share in productivity growth

• Behind most of today’s innovation

• Prominent source of economic activity and value creation


Source: McKinsey Global Institute 2016

What lies ahead?

High value addedactivities


Low value added activities

Smiley curve today

What lies ahead?



Low value addedactivities

Smiley curve tomorrow

China is making significant progress…

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Source: Hausmann and Hidalgo

But still, a long way to go

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Source: Arbache 2015

What seems to be driving Chinese outward investments?

• Short-term factors:

Diversification of foreign reserves portfolio away from US Treasury bondsMove of environmental unfriendly and low value added

factories to less developed countriesInvestments that help mitigate the idleness of certain

fields of the Chinese manufacturing, e.g. infrastructure


• Medium/long term factors

Acquisition of knowledge and technology (M&A)Influence in global and regional decision-makingMarket- and resource-seeking investmentsDevelopment of Chinese (global) value chainsChanges in the productive structure in favor of more

high value-added stuff


Source: Arbache (2012)


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What seems to be driving Chinese outward investments?China 1995-2013 – Industry-space

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China is upgrading its economy…

• 13th Five Year Plan

• China Manufacturing 2025

• Internet Plus Initiative

…and repositioning itself in CGVs

• Already producing more value added goods and services

• One Belt, One Road Initiative

• Asian Infrastructure Investment Bank and the BRICS Bank

• Go global strategy 16


• Major player in FDI market -- from US$ 10.2 billion in 2005 toUS$ 113.6 billion in 2015

• China may turn into a net outbound investment country in2016

• FDI still mostly led by SOEs

• Large developed countries account for the lion’s share of the

Chinese FDI

• US largest recipient

• Australia and Canada, mineral-rich countries

• Interest for advanced economies is increasing – market,

technology

• Brazil - 4th largest recipient (US$ 39.4 billion or 5.1% of total)

China’s FDI destination

Chinese FDI by country since 2005 to first half of 2016 (US$ billion)

Year Investment Volume Share %

United States 129.9 16.7

Australia 80.9 10.4

Canada 45.2 5.8

Brazil 39.4 5.1

Britain 36.4 4.7

Russian Federation 25.3 3.3

Italy 19.6 2.5

France 19.1 2.4

Kazakhstan 17.9 2.3

Peru 17.1 2.2

Subtotal for top 10 430.7 55.4

Total for all countries 776.8 100.0

Source: American Enterprise Institute and Heritage Foundation/China Global Investment Tracker; produced by: SEAIN/MP.



• In many countries, no ownership of the assets -- instead,there are large construction projects

• Investment and construction are sharply distinct activities,but both are crucial in assessing China´s global engagement

• Asian and African economies, with emphasis in oil exporters

Chinese construction projects by country since 2005 to first half of 2016 (US$ billion)

Year Investment Volume Share %Pakistan States 34.3 5.9Nigeria 29.3 5.1Saudi Arabia 22.3 3.8Algeria 21.7 3.7Ethiopia 19.8 3.4Indonesia 18.4 3.2Vietnam 16.2 2.8Iran 14.8 2.5Malaysia 14.5 2.5Venezuela 14.3 2.4Subtotal for top 10 205.6 35.5

Total for all countries 578.1 100.0Source: American Enterprise Institute and Heritage Foundation/China Global Investment Tracker; produced by: SEAIN/MP.


Table 5. Chinese Investment and Construction Projects by Sector Allocation from 2005 to H1 2016 (US$ billion)

Year Investment Volume Share % Construction Share %Energy and Power 294.6 37.9 255.1 44.1Transport 61.8 5.1 177.4 30.6Metals 121.1 15.5 25.5 4.4

Real state 75.0 9.6 60.4 10.4Finance 58.4 7.5 - -

Technology 47.4 6.1 15.4 2.7

Agriculture 30.6 3.9 16.3 2.8Tourism 23.2 2.9 3.7 0.6Entertainment 24.0 3.1 2.0 0.3Chemicals 9.7 1.2 7.3 1.3

Other 30.9 35.5 15.1 2.6Total for all countries 776.8 100.0 578.1 100,0

Source: American Enterprise Institute and Heritage Foundation/China Global Investment Tracker; produced by: SEAIN/MP.

China´s FDI Sectoral Allocation

China´s FDI in Brazil

• 42 investment projects, totaling of US$ 39.4 billion

• 48.6% of total Chinese FDI in South America

• Energy and Power (66.4%), Metals (10.2%), Agriculture

(5.7%) and Finance (5.3%)

• Only 13 investment projects are greenfield (US$ 4.9 billion)

• In 2016, six operations totaling US$ 11.9 billion – energy and public services

Chinese OFDI to Brazil2005-July/2016

Year Month InvestorQuantity in

MillionsShare Size Transaction Party Sector Subsector Country Greenfield

2009 November Wuhan Iron and Steel 400$ 22% MMX Mineracao Metals Steel Brazil

2009 December CIC 500$ CVRD (Vale) Metals Steel Brazil

2010 February Sany Heavy 200$ Real estate Construction Brazil G

2010 March

East China Mineral Exploration and

Development Bureau (Jiangsu) 1.200$ Bernardo de Mello Itaminas Metals Steel Brazil

2010 May Sinochem 3.070$ 40% Statoil Energy Oil Brazil

2010 May State Grid 1.720$ 100% Plena Transmissoras Energy Brazil

2010 August Chery Auto 400$ Transport Autos Brazil G

2010 October Sinopec 7.100$ 40% Repsol Energy Oil Brazil

2010 December CIC 200$ BTG Pactual Finance Investment Brazil

2011 March Chongqing Grain 910$ Agriculture Brazil G

2011 April ICBC 100$ Finance Banking Brazil G

2011 April ZTE 200$ Technology Telecom Brazil G

2011 August Taiyuan Iron, CITIC, Baosteel 1.950$ 15% CBMM Metals Brazil

2011 August JAC Motors 100$ 20% SHC Transport Autos Brazil G

2011 November Sinopec 4.800$ 30% Galp Energia Energy Brazil

2012 May State Grid 940$ ACS Energy Brazil

2012 May China Construction Bank 200$ 100% WestLB Finance Banking Brazil

2012 September Lenovo 150$ 100% Digibras and Dual Technology Brazil

2012 September BAIC 300$ Transport Autos Brazil G

2012 October JAC Motors 450$ Transport Autos Brazil G

2012 November CIC 460$ 33% Prosperitas Real estate Property Brazil

2013 April COFCO 320$ Agriculture Brazil G

2013 June Xugong Construction Machinery 200$ Real estate Construction Brazil G

2013 October CNOOC and CNPC 1.280$ 10%, 10% Petrobras, Shell, and Total Energy Oil Brazil G

2013 October China Construction Bank 720$ 74% Banco Industrial e Comerical Finance Banking Brazil

2013 December Three Gorges 130$ Energy Hydro Brazil

2013 December Three Gorges 250$ 50% Jari Energy Hydro Brazil

2014 February Three Gorges 390$ 33% Terra Novo Energy Hydro Brazil

2014 April COFCO and Hopu Investment 750$ Noble Agri Limited Agriculture Brazil

2014 July Sany Heavy 300$ Real estate Construction Brazil G

2014 July ZTE 100$ Technology Telecom Brazil

2014 August China Construction Bank 720$ 72% Banko Industrial and Comercial Finance Banking Brazil

2014 December Three Gorges 140$ 49% EDP Energy Alternative Brazil

2015 May BYD 100$ Energy Alternative Brazil G

2015 May Bank of Communications 170$ 80% Banco BBM SA Finance Banking Brazil

2015 August Three Gorges 490$ Triunfo Participacoes Energy Brazil

2015 October ICBC 2.000$ Petrobras Energy Oil Brazil

2015 November HNA 460$ 24% Azul Linhas Aereas Brasileiras Transport Aviation Brazil

2015 December Three Gorges 3.660$ Energy Hydro Brazil

2016 April State Grid 110$ Mato Grosso Energy Brazil

2016 April China Molybdenum 1.500$ Anglo American Chemicals Brazil

2016 May Shanghai Pengxin 290$ 57% Fiagril Participaçõe Agriculture Brazil

Total - - 39.430$ - - - - -

Source: Global Investment Tracker/The American Enterprise Institute and the Heritage Foundation; produced by: SEAIN/MP.

Thank You

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A View of the Chinese Global Investments · 2016. 12. 13. · 2012 September BAIC $ 300 Transport Autos Brazil G 2012 October JAC Motors $ 450 Transport Autos Brazil G 2012 November