Investment Opportunity Index for Chinese Companies in Emerging Markets, 2018

The latter half of the twentieth century recorded a rapid rise in globalization, with countries opening up their economies to foreign investments and capital moving rapidly across borders as the barriers were removed. Eventually, investments started pouring into countries with a high gross domestic product (GDP), with their promising GDP growth helping them form an economic bubble. Following the financial crisis of 2008, rapid market recovery and continued growth in the developing and emerging economies encouraged greater influx of foreign direct investment (FDI) into these economies.

United Kingdom, Japan, France, Germany, and the United States have been the five largest global investors for decades. Although China entered the market late, by 2000, it had become a prominent investor globally; and today, it is among the three-largest contributors of overseas direct investment globally. Since the rise of globalization in the 1990s, China has overhauled its political and economic framework. Initiation of full-scale economic reform and transition to democracy in the country have resulted in unprecedented economic expansion with multifold growth in import and export. Along with foreign investment inflows, Chinese overseas direct investments have remained under the spotlight since then. With the magnanimous Belt and Road Initiative, also known as One Belt One Road (OBOR) or the Silk Road Economic Belt and the 21st-century Maritime Silk Road, being released in 2013, China eyes an exponential rise in its ODI into infrastructure, education, automobile, power, steel, and other sectors. Moreover, with greater economic cooperation with the European Union (EU) and the Association of Southeast Asian Nations (ASEAN), China’s future as a giant foreign investor will prosper. According to the World Bank, by 2040, the global investment requirement barring China in infrastructure alone will reach $66 trillion.

While the major chunk of state-driven Chinese ODI has traditionally been channeled toward established markets in the west as well as the resource-heavy developing countries globally, there has slowly been a change in perception among private players that are increasingly seeking to tap into newer markets, particularly those in Sub-Saharan Africa and East Asia as well as the small countries in South America. These regions share certain common characteristics such as large middle class, strong digital push, impressive business abilities, and upbeat economic growth.

With the emerging markets increasingly seen as a prime engine of growth and innovation, Chinese investors are constantly striving to ascertain the best-possible locations for investment. The GIL Investment Opportunity Index for Chinese companies specifically looks into some of the promising emerging markets and seeks to identify the best and most opportune locations to tap into.