China’s Overseas Foreign Direct Investment Risk: 2008–2009

The document analyzes China's 'going-out' strategy, noting that while overseas FDI grew rapidly, it remained concentrated in energy and mining sectors and faced significant losses. It identifies four primary risk categories: breach of contract, exchange losses, premium-value transactions, and integration failures. The author argues that systemic risks stem from excessive government intervention and a lack of international management capacity, while external risks are primarily driven by the incompatibility of legal, political, and social institutions between China and host countries.

• China's overseas FDI is characterized by high geographical and industrial concentration, with the top ten recipient countries/regions accounting for 81.1% of total investment in 2008.
• Cross-border mergers and acquisitions (M&A) are heavily skewed toward the energy and mining sectors; in 2008-2009, 13 M&A in energy ($27.754 billion) and 15 in mining ($26.234 billion) represented the vast majority of transactions over $100 million.
• Chinese overseas FDI faces four primary operational risks: breach of contract and unexpected transactional costs, exchange losses, premium-value transactions, and failure of post-acquisition integration.
• Significant losses occurred due to currency fluctuations, exemplified by Chinalco's exchange losses of RMB 2.351 billion in the first three quarters of 2008 and CITIC Pacific's losses of over HKD 29.1 billion following the plummet of the Australian dollar.
• Integration failures often stem from a lack of cultural alignment and inadequate pre-merger investigation, as seen in SAIC's acquisition of Ssangyong Motor Company, which resulted in bankruptcy and a loss of control for SAIC.
• Internal systemic risks are driven by excessive government intervention, a lack of long-term overseas investment strategies, and low international business management capacity among Chinese enterprises.
• An analysis of 160 countries and regions indicates that the most common and severe external risks for Chinese FDI are related to labour unions and stakeholders, legal systems, and environmental requirements.
• The primary external barrier to successful Chinese overseas FDI is the incompatibility of legal, political, and social institutions between China and the host countries.

APA

Duanyong, W. (2011). China’s Overseas Foreign Direct Investment Risk: 2008–2009. South African Institute of International Affairs. https://saiia.org.za/wp-content/uploads/2011/02/Occasional-Paper-73.pdf

Chicago

Duanyong, Wang. China’s Overseas Foreign Direct Investment Risk: 2008–2009. South African Institute of International Affairs, 2011. https://saiia.org.za/wp-content/uploads/2011/02/Occasional-Paper-73.pdf.

Wikipedia

{{cite report |last1=Duanyong |first1=Wang |title=China’s Overseas Foreign Direct Investment Risk: 2008–2009 |publisher=South African Institute of International Affairs |date=January 2011 |url=https://saiia.org.za/wp-content/uploads/2011/02/Occasional-Paper-73.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{duanyong2011chinas, author = {Duanyong, Wang}, title = {{China’s Overseas Foreign Direct Investment Risk: 2008–2009}}, institution = {South African Institute of International Affairs}, year = {2011}, month = jan, url = {https://saiia.org.za/wp-content/uploads/2011/02/Occasional-Paper-73.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }