A large share of China’s outbound direct investment was used on overseas mergers and acquisitions. Overseas expansion of Chinese companies is also encouraged by the Chinese government. Beijing issued a new set of overseas investment guidelines in January of 2019, aiming to make M&A of Chinese companies easier. At the same time, the Chinese government is also increasing oversight on overseas investment practices of Chinese companies to avoid money laundering and illegal capital outflows.
Thanks to the government’s strong support for the Belt and Road Initiative, the Belt and Road countries are expected to benefit from the direct investment from China. The Belt and Road Initiative involves over 60 countries, which are mainly developing economies and together account for one-third of global GDP and 60 percent of the world’s population. The investment in these countries includes a large amount of infrastructure construction which also creates the need for China’s industrial capacity in turn.
The challenges for China’s outward investment are increasing. In the high-tech sector, Chinese companies are facing stricter investment restrictions, which are mainly based on national security and strategic asset protection. Due to political changes in some invested countries, the prospect of China's investment based on governmental cooperation in these countries also becomes unclear.