EIU: US,Singapore Most Attractive Destination For Chinese Outbound Investment In 2015
The index, which was first launched in 2013, ranks the attractiveness of 67 major economies to Chinese firms. To capture the latest trends in investment, the 2015 GGI ranks countries based on 70 indicators, increased from 55 in previous versions.
The new indicators cover areas such as agriculture, overseas contracted projects, quality of infrastructure, service industry and country credit risk.
Australia and South Korea enjoy improved rankings. Both feature in the top 10 destinations, reflecting the free trade agreements they signed with China in 2015.
EU countries and Canada have seen their rankings improve due to the inclusion of new indicators such as financial market, real estate, and the quality of infrastructure.
The impact of the falling commodity prices has also been felt by countries such as Russia, Kuwait, Kazakhstan and Pakistan – all of whom saw their rankings tumble.
Political stability has also played a key role in this year’s rankings – Egypt and Portugal have both jumped in the rankings as a result of greater openness to foreign investment. Conversely, Taiwan’s ranking has fallen this year as we anticipate that the recent change in government will mean that closer cross-Strait relations are likely to slow.
The “One Belt, One Road” (OBOR) initiative has become a strategic priority for the Chinese government since our previous update to the GGI.
Although many countries along the OBOR route, such as Pakistan, Bangladesh and Kenya, are relatively risky destinations for investment, they scored highly in the index owing to the potential for getting Chinese government-directed funding.
Opportunities and risks
Based on their relative scores in the opportunity and risk pillars, the report classified all 67 countries into four groups. The analysis reveals a group of countries which offer high opportunities with limited risks. They are mostly developed countries, with the exception of Malaysia.
Iran has low opportunity and a high risk score, but its ranking improved by four places due to a brighter macroeconomic outlook inspired by the lifting of sanctions on energy and financial sectors.
The business environment for Chinese investors is likely to improve after the recent visit of Chinese president Xi Jinping.
“For Chinese ODI to keep up its momentum, firms will need to approach investment in a more sophisticated manner," says Yue Su, Deputy Economist of The EIU Access China.
"In the past, Chinese investment exhibited a strong pro-cyclical pattern—firms bought natural resources when its economy was growing fast and, as a result, they found themselves often paying peak prices for commodities. A counter-cyclical approach and long-term thinking will be the key to success for future ODI.”
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