On Saturday, March 29th, CKGSB hosted its 3rd annual Young Investors Forum, a series of discussions led by industry experts and executives as well as key CKGSB faculty, pertaining to the most relevant investment themes of today. Yang Jing of Global Times discusses the key themes and takeaways from the event, including major challenges and opportunities going forward.
China’s surging outward direct investment (ODI) has also resulted in Chinese investors facing more challenges including unfamiliarity with overseas laws and restrictions at home and abroad, experts said at the 2014 Young Investor Forum held by Cheung Kong Graduate School of Business in Beijing on Saturday.
Since the reform and opening-up policy in 1978, China has gradually developed from mainly attracting foreign investment to attaching equal importance to ODI, Zhang Guobao, chairman of China Industrial Overseas Development & Planning Association, said at the forum.
In the past decade, China’s ODI has grown by an average of 40 percent annually, indicating a good momentum for development, Zhang said, predicting that in the next five years, China’s total ODI may reach $500 billion.
China’s ODI reached $90.17 billion in 2013, with 16.8 percent year-on-year growth, according to data released by China’s Ministry of Commerce on January 17.
But given that China is the world’s second largest economy, China still has space to grow in terms of ODI, Zhang said, noting that China’s investment targets have expanded from energy resources to agriculture, real estate and infrastructure.
Chinese also face challenges in overseas investment due to a lack of experience in the field, Zhang said.
Investors should study local laws and customs in a bid to avoid disputes and conflicts, Zhang suggested, taking CITIC Pacific Ltd as an example of failure.
In 2006, CITIC Pacific bought two mines for $415 million from Australian billionaire Clive Palmer but the purchase became a disaster as CITIC Pacific ran into regulatory hurdles, soaring costs, labor shortage, disputes over hiring Chinese workers as well as lawsuits with Palmer, media reports said.
Another major difficulty with ODI confronting Chinese investors is financing, Zhang said, noting it is time-consuming to apply for loans from State-owned banks for overseas investment due to the level of approvals required.
Gao Xiqing, former vice chairman and president of China Investment Corporation (CIC), also said CIC encountered administrative restrictions in overseas investment.
CIC was founded in 2007, aiming at making investments with China’s foreign exchange reserves, but CIC is not allowed to invest in Chinese companies, Gao said, making CIC the only sovereign fund in the world that is prevented from investing in its country’s own companies.
Another more serious challenge faced by CIC is some countries’ doubts about Chinese investors, Gao said, noting the level playing field in some [developed] countries is not always as level as those countries might claim it is.
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