World Economy

China Offshore Assets Will Reach $20t in 2020

China Offshore Assets Will Reach $20t in 2020
China Offshore Assets Will Reach $20t in 2020

China is expected to become the world’s biggest overseas investor by 2020. Beijing’s global offshore assets will likely triple from $6.4 trillion, to more than $20 trillion by then, a report says.

China will invest more in the developed West, much of the money coming from foreign exchange reserves and portfolio investments, says joint research by Rhodium Group and Germany’s Mercator Institute for China Studies, RT quoted the Financial Times as saying.

However, the share of China’s direct investment is also booming. In 2000-2014, Chinese businesses directly invested €46 billion ($51.3 billion) in 28 EU countries. The UK was the biggest recipient getting €12.2 billion over the period, with Germany getting €6.9 billion and France €5.9 billion.

Energy, automotive, food and real estate sectors attracted the most Chinese money into Europe.

With China being one of top three exporters of direct investment in the world, its outbound foreign direct investment stock is expected to reach $2 trillion, more than doubling the current $744 billion.

Currently China is the world’s biggest trader of goods, while its share of global financial cross-border trading remains minor; at 3.4% in 2011.

Beijing’s “authoritarian political system” and closed nature of local markets to foreign direct investment may, however, become a gridlock according to the research. China is considered “one of the least open countries among the G20 economies,” the authors say.

The West is not the only place for Chinese foreign direct investment.

In April it established the Asian Infrastructure Investment Bank along with 52 countries. With its headquarters in Beijing, the bank will bankroll infrastructure projects in the Asia-Pacific region. The initial subscribed capital of AIIB is $50 billion and is expected to increase to $100 billion.

The BRICS and SCO summits to be held on July 8-10 in Russian city of Ufa should see the launch of another cross-border bank. The $100 billion BRICS New Development Bank and a currency reserve pool worth another $100 billion will probably be launched at the summit, said Russian President Vladimir Putin in May.

The currency pool is expected to shield the BRICS bloc from exchange rate volatility, while the bank will finance infrastructure projects within the group.