Mainland Chinese companies are expected to increasingly foray overseas to offset weak domestic demand and competition, with Beijing expected to support the trend via financial aid and tax subsidies to expand its global influence, Moody’s Ratings said in a report on Monday.
The rating agency also expected more Chinese investments in sectors linked to critical resources like oil and gas, as well as commodities related to advanced technologies and clean energy stemming from China’s strategic goals and national security concerns.
These investments were likely to focus on emerging markets like South and Southeast Asia, Latin America and the Middle East, which accounted for 90 per cent of the country’s total outward direct investment (ODI) in 2023, Moody’s said, citing data from the Ministry of Commerce.
“A successful expansion in overseas income could boost China’s GNI [gross national income] and help offset the negative economic impact of weaker export demand, driven by trade tensions, or subdued domestic demand stemming from weak consumer sentiment,” said analysts led by Lillian Li.
08:23
China unveils policy package to guard against US tariffs ahead of trade talks in Switzerland
China unveils policy package to guard against US tariffs ahead of trade talks in Switzerland
This would enhance China’s economic diversification, improve its net international investment position and increase foreign assets for domestic use – all of which supported China’s long-term growth potential and were good for the country’s credit rating, Moody’s said.
Factory activity in China improved in June but stayed in contractionary territory for a third straight month, as the country battled soft demand and the effects of a trade war with the US. The world’s second-largest economy was also battling other headwinds, including a prolonged property market downturn and persistent deflationary pressure.
