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This chart shows China’s overweight or underweight observed external investment position since 2000 in a given sector relative to that sector’s share of world market capitalization. A positive number indicates that China is overweight in a given sector; a negative number indicates that China is underweight. As the chart below shows, China is most overweight in materials and energy. This reflects a desire for stable economic growth, which, in the Chinese government’s view, requires a secure source of inputs. As other sectors in China develop, along with the managerial skills required to integrate international acquisitions, China’s aggregate portfolio allocation will likely even out.
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how do you estimate china’s external investment? presumably they are in aggregate overwieght us and european fixed income and underweight equities. does china have niip data that shows it total external investments across sectors?
This picture only applies to business investment. Those data are not from the NIIP release; rather they are aggregated from individual investments collected by Bloomberg. The database captures both acquisition and partial investment, but is certainly not perfect. It would likely miss small direct equity investment or equity investment through external managers.
interesting chart, matches with some of the other data and anectdotal data. what entities are you including in “China”, the CIC, SAFE, national oil companies, all SOEs?
It would also be interesting to see a chart like this on countries/regions of equity investment
The external investment portion of the chart was made by aggregating individual deals, which includes partial stakes, not just M&A, from Bloomberg’s deal data. It should be inclusive of all Chinese entities. Bloomberg does a fair job picking up deals that are mentioned in the press. However, deals that are not disclosed would be missing from the data set. The data set includes 643 deals, although not all had a sector data field.
We created a countries/regions chart, but those data are inadequate to the task – at least without a lot of clean-up. This is due to deals being labeled based on location of incorporation instead of location of activity. The Virgin Islands, for example, end up with a large weight.
Interesting pice of data. Supports widely held intuition that “China” (in this case the predominantly the state in all of its manifestations, because the locally owned private sector may be unable (or unwilling, or using overseas chinese friends) to invest abroad) seems to aspire to operating like a vertically integrated (set of) conglomerate. And the state wants to compensate for the lack of inputs (quality/quantity/cost) of locally available ones. Technology is an important input that would generally not result in cross border financial investment (of course China would like to buy some technology companies if it was allowed to do so) but of course “technology imports/investments” would be a far more important topic.
But this once more underlines the fact that “China” is no ordinary investor..