[Gao Feng]: Dear friends from the press, good afternoon! Welcome to the press conference of Ministry of Commerce. Here, Ministry of Commerce, National Bureau of Statistics and State Administration of Foreign Exchange will release Statistical Communiqué of Chinese OFDI in 2017 . We are very glad to have invited the Deputy Director of MOFCOM Department of Outward Investment and Economic Cooperation Zhang Xingfu and the Deputy Director of Department of Trade and Foreign Economic Statistics Lu Shan, and they will introduce the related situations and answer your questions. First, Deputy Director of MOFCOM Department of Outward Investment and Economic Cooperation Zhang Xingfu will release the Statistical Communiqué of Chinese OFDI in 2017 on behalf of the three departments.

[Zhang Xingfu]: Good afternoon, dear friends from the media! Welcome to attend today's press conference. According to the relevant work arrangements, the Statistical Communiqué of Chinese OFDI in 2017 jointly edited and published by the Ministry of Commerce, the National Bureau of Statistics, and the State Administration of Foreign Exchange will be released here. I will briefly introduce the main contents of the Communiqué on behalf of the three departments, and exchange ideas with you about the situation.

Foreign investment cooperation is a bridge between China and the rest of the world for their deep economic integration and the achievement of mutually beneficial and win-win situation. Under the strong leadership of the Central Party Committee and the State Council, Ministry of Commerce has actively promoted the Belt and Road construction, steadily carried out the international capacity cooperation, conducted macro monitoring, planning guidance, service guarantee, interim and post-mortem supervision, and prevention of risks through continuing to improve the “going out” work system. The process of integrating Chinese enterprises into economic globalization has been speeding up. In 2017, the global economic growth rate reached 3%, and the trade in goods increased by 4.7%, both of which set the fastest growth rate since 2011 while the global foreign direct investment fell for two consecutive years in 2016 and 2017. In 2017, cross-border mergers and acquisitions and declared greenfield investment declined by 22% and 14% respectively. Since the end of 2016, the Chinese government has strengthened the review of the authenticity and standardization of foreign investment by enterprises. The foreign investment of market entities has become more mature and rational, and the growth rate of Chinese enterprises' foreign investment has slowed down with the structure further optimized.

The Statistical Communiqué of Chinese OFDI in 2017 consists of 6 parts including brief situations of China's outward foreign direct investment, the characteristics of China's outward foreign direct investment, China's direct investment in major economies, the composition of China's outward foreign direct investors, the distribution of China's outward foreign direct investment enterprises, and annexed tables, and the situation of China's foreign direct investment in 2017 is elaborated.

China's outward foreign direct investment in 2017 mainly has the following features:

First, outward foreign direct investment flows showed negative growth for the first time, with its scale ranking third in the world. In 2017, China's outward foreign direct investment was US$158.29 billion, down 19.3% year on year. Since China released its annual statistics in 2003, it has experienced negative growth for the first time, but it is still the second highest in history, accounting for more than 10% of the global total for two consecutive years. The influence of China's outward foreign investment in global foreign direct investment has been expanding, and the scale of investment flows is second only to the US and Japan, ranking third in the world and down by one place from the previous year. From the perspective of two-way investment, China's outward foreign direct investment flows have been higher than foreign investment attraction for three consecutive years.

Second, the scale of foreign investment stocks rose to No. 2 in the world while still lagging behind the US noticeably. At the end of 2017, China’s outward foreign direct investment stock was US$1809.04 billion, accounting for 5.9% of the global foreign direct investment outflow stock. It was distributed in 189 countries and regions around the world. The stock volume increased by US$451.65 billion from the end of the previous year and jumped to the second place in global stocks, 4 places ahead compared with the previous year. China’s stock still lags far behind that of the US which ranks the first, and is only equivalent to 23.2% of the US. It is closer to China’s Hong Kong, Germany, the Netherlands and the United Kingdom that rank the top six.

Third, The industrial distribution was wide with a complete range of categories, and the stock scale of 6 largest industries exceeded US$100 billion. In 2017, China’s outward foreign direct investment covered 18 industrial categories of national economy, among which investment flew to business service, manufacturing, wholesale and retail and finance fields was over US$ 10 billion, accounting for over 80%. There were 6 industries with the stock scale over US$ 100 billion, including leasing and business service industry, wholesale and retail industry, information transmission/software and information technology service industry, financial industry, mining industry and manufacturing industry, taking up 86.3% of the total stock of China’s outward foreign direct investment.

Fourth, M&A fields were extensive, and the scale of overseas financing hit a historical record. In 2017, Chinese enterprises carried out 431 overseas investments of M&A, covering 56 countries and regions with the actual trade volume reaching US$ 119.62 billion, among which the direct investment was US$ 33.47 billion, accounting for 28% of the total volume of M&A; the overseas financing reached US$ 86.15 billion, 70% higher than that of the last year, and taking up 72% of the total volume of M&A. M&A covered 18 industrial categories, among which the volumes of overseas M&A in manufacturing, mining, production and supply of electric power/heating power and water, accommodation and catering, leasing and business services ranked top 5.

Fifth, Investment in Europe and Africa grew fast, and investment in countries along the “Belt and Road” routes increased by 30%. In 2017, investment in Europe reached US$ 18.46 billion, hitting a new record high, and up 72.7% year on year; investment in Africa was US$ 4.1 billion, up 70.8% year on year. The direct investment flow to the countries along the “Belt and Road” route was US$ 20.17 billion, up 31.5% year on year, taking up 12.7% of China’s outward foreign direct investment flow in the same period.

Sixth, RMB was active in outward foreign investment, and the reinvestment using the profits taking up more than 40%. In 2017, 20% of China’s outward direct investment flow was settled in RMB, covering over 800 Chinese domestic enterprises, and mainly in the form of equity rights and debt instruments for enterprises’ investment abroad. In terms of the flow structure, in 2017, the newly-added equity investment was US$ 67.99 billion, accounting for 42.9% of the total flow; investment in debt instruments was US$ 20.66 billion, taking up 13.1%; in 2017, the reinvestment using profits of Chinese enterprises abroad was US$ 69.64 billion, up 127% year on year, accounting for 44% of China’s outward foreign direct investment flow in the same period.

Seventh, Decrease of outward foreign investment flow of local enterprises was large, and the proportion of the stock increased by almost 1%. In 2017, the outward non-financial direct investment flow of local enterprises was US$ 86.23 billion, down 42.7% year on year, taking up 61.8% of China’s non-financial flow, and the stock was US$ 727.46 billion, accounting for 45.3%, up 1% compared with that of last year; driven by large M&A and capital increase projects, the outward foreign investment of central enterprises and departments was US$ 53.27 billion, up 73.4% year on year. Shanghai, Guangdong and Zhejiang ranked top 3 as for the outward direct investment at the provincial level in 2017.

Eighth, Overseas enterprises’ contributions to the tax revenue and employment of the host country were obvious, and the win-win effect of outward investment came out. In 2017, the total tax paid by the enterprises abroad to the host country reached US$ 37.6 billion, and the employed foreign staff over 1.71 million, 367,000 more than that of the end of last year.

The Statistical Communiqué of China’s Outward Foreign Direct Investment in 2017 was all released. Thank you, friends from the press, for our concerns for, our attention to and our support for the development of China’s outward investment and cooperation. Thank you!

Gao Feng: Thank you, Deputy Director Zhang Xingfu. Next, Let’s welcome Deputy Director of the Department of Trade and Foreign Economic Statistics Lu Shan to introduce the situation of the construction of statistic system of China’s outward foreign direct investment.

[Lu Shan]: Dear friends from the media, good afternoon! Welcome to this press conference. Just now, on behalf of the Ministry of Commerce, the National Bureau of Statistics and the State Administration of Foreign Exchange, Deputy Director of the Department of Outward Investment and Economic Cooperation of MOFCOM Zhang Xingfu released the 2017 Statistical Communique on China's Outward Foreign Direct Investment. Although China’s OFDI in 2017 showed a negative growth for the first time, it still ranked the third with US$158.3 billion in the world and exceeded the level of the attraction of foreign investment in China in the same period. By the end of 2017, China’s OFDI stock was 1.8 trillion US dollars, ranking the second in the world.

China’s OFDI statistics are calculated by one department and generally released by the departments responsible for the investigation projects in accordance with relevant government regulations. It is rare to see the National Bureau of Statistics and relevant departments of the State Council jointly releasing the statistics. Relevant monthly and quarterly statistics on China’s OFDI will also receive significant attention at the internal economic situation analysis meeting of the National Bureau of Statistics. This fully demonstrates the important role of China’s FDI statistics and its important position in foreign trade.

Before 2002, China’s outward FDI statistics were deficient. Thus, the National Bureau of Statistics and the former Ministry of Foreign Trade and Economic Cooperation jointly set the Statistical Regulations for Foreign Direct Investment in 2002 and jointly issued the annual statistical communique which only involves non-financial sectors in 2004. In 2006, after the addition of OFDI statistics of the financial sector managed by the State Administration of Foreign Exchange, the statistical communique became more complete. From 2002 to 2016, the three departments combined the international standards and the actual situation of China’s foreign investment, and revised the statistical regulations seven times for improvement. In the latest revised statistical regulaitons in December 2016, two statistical tables of “major mineral resources overseas” and “major international capacity cooperation areas” were added, and clear regulations for the annual assessment of statistical work and the punitive measures for refusing to report statistics were made.

All along, the Ministry of Commerce, the National Bureau of Statistics and the State Administration of Foreign Exchange have fulfilled their own responsibilities and carried out sincere cooperation to do well in this statistical work. The Ministry of Commerce is responsible for organizing and implementing the statistical work of China’s OFDI, investigating foreign investment activities of non-financial enterprises and collecting statistics of the whole industry; as the leading organizer and coordinating institution of the national statistical work, the National Bureau of Statistics is mainly responsible for the reviewing and approving the statistical regulations and ensuring the scientific standards and norms. The State Administration of Foreign Exchange is responsible for collecting statistics on foreign investment activities of financial enterprises and providing relevant statistics to the Ministry of Commerce.

I need to emphasize that China’s outward FDI statistical work is in line with international standards and norms. It follows Benchmark Definition of Foreign Direct Investment Statistics (4th edition) of the Organization for Economic Cooperation and Development and the relevant statistical principles of the the Balance of Payments and International Investment Position Manual (6th edition) of the International Monetary Fund..The statistical results are comparable with those of other countries, and the statistical work is in line with international norms. According to the regulations of the statistical system, three departments release the statistics of China’s outward FDI of the previous year through the statistical communique before the end of September each year.

Thank you!

[Gao Feng]: Thank Deputy Director Lu Shan for his comprehensive introduction. Just now, the two spokesmen gave a detailed introduction to the 2017 Statistical Communique on China's Outward Foreign Direct Investment and the related systems’ construction. Now let’s move to the session of questions and answers. The journalists could ask questions about the theme of today’s news conference. On a regular basis, please tell us the name of your news agencies before asking questions. Now let's start.

CGTN: My question goes to DG Zhang. As we know, starting from 2016, the Chinese government intensified the review on the authenticity and compliance of outbound investment. What is the reason? Is the review ongoing? Thank you.

Zhang Xingfu: Thank you. Since the 18th Party Congress of the CPC, Chinese businesses have made outbound investment in a proactive and steady manner, playing a positive role in exporting Chinese products, technologies and services and contributing to the domestic economic transformation, win-win cooperation with other countries and the Belt and Road development.

However, as the outbound investment grows rapidly, there are some problems. As you said, between the end of 2016 to the beginning of 2017, we started to review the authenticity and compliance of outbound investment based on the following reasons. We found that the ill-informed investment decisions of some companies have caused operation difficulties and economic losses. Some companies invest heavily the housing market, rather than in real economy, resulting in sharp increase in the outflow of capital. Some companies ignore the requirements on environment, energy consumption and safety, got into troubles and disputes and suffered from economic loss. This also undermined China’s national image.

To forestall the potential system risks prompted by rapid outbound investment growth in the short term, MOFCOM has strengthened the authenticity and compliance review of outbound investment to encourage prudent and rational investment making. Going forward, MOFCOM will continue to promote outbound investment and ensure it’s made in a rules-based manner. We will deepen the reform to delegate powers, improve regulation and government services, and continue to improve the review mechanism and ensure healthy and steady outbound investment.

CNR: My question goes to the statistics bureau. As we know, China collects data on outbound investment based on the first investment destination. We see a large amount of investment concentrated in Hong Kong, Virgin Islands and Cayman Islands. Will the statistics department consider collecting data based on the final investment destination?

Lu Shan: Thank you for your interest in China’s statistical work for outbound investment. You raised a quite professional question. Since the Statistical System for Outbound Investment was developed in 2002, China has been collecting outbound investment data based on the first destination. There are two reasons for this principle:

First, it is easy to compare the official statistics with other countries. According to our knowledge, most of the countries in the world follow the first destination principle, while only the US and a few other countries adopt the final destination approach. They rarely publish the detailed country-specific or sector-specific data.

Second, this will ensure the accuracy and timeliness of our statistics. Statistics collection for outbound investment is highly technical, as it involves equity investment, re-investment with returns and debt instrument investment, etc. It also involves the financial statement of overseas companies. Compared with the final-destination approach, it is easier to focus on the first destination and it takes less workload. With the current statistical capability, we can ensure timely and accurate statistics. If we take the final destination approach, we need to divide and check the financial statements of overseas companies at different layers and levels. This calls for huge input of human resources, financial resources and time. It may be able to capture the outbound investment in their final destinations in a more objective and accurate way, but it’s not timely.

Given these two reasons, we have followed the principle of taking the first destination as the basis for data collection. In light of the significance of final destination statistics, MOFCOM has done a huge amount of basic research and explorations starting from 2006. As China’s outbound investment keeps expanding, MOFCOM has worked with the statistical and foreign exchange departments to trial the final destination approach since 2015. When the conditions are ready, we will consider publishing two sets of statistics, on based on first destination and the other based on the final destination. Thank you.

MASTV: There were more than 40,000 Chinese enterprises operating overseas by the end of 2017. There is no shortage of comments on Chinese business operation overseas. What does MOFCOM think of this issue as an outbound investment regulator? Thank you.

Zhang Xingfu: Thank you for the question. Indeed, the investment cooperation of Chinese companies overseas is of great interest to people from all walks of life. There are various comments, so are the sources of information. We are as interested in the status of those companies as you are at a time of rapid growth in Chinese foreign direct investment, in particular their performance.

Nonetheless, any conclusion should be fact-based. Since the press conference is on statistical communiqué, I’d like to answer your question with a set of figures. In 2017, global economy and trade in goods saw a record growth since 2011, and the overall profitability of Chinese businesses overseas also improved. According to our statistics, Chinese enterprises overseas generated a total profit of US$137.8 billion, up by 52% year-on-year. Over 70% enjoyed profit or flat growth in their annual financial report. Among nearly 3,800 central SOEs overseas, more than three quarters were profitable. Therefore, we think the operation status of Chinese enterprises overseas is in good shape. Thank you.

Phoenix TV: DG Zhang, Chinese direct investment in the United States in 2017 was just one third of that in 2016. In the first eight months of this year, Chinese investment continued to drop notably. Do you think the main cause is the US reinforcing investment review on the grounds of security? Thank you.

Zhang Xingfu: Thank you. Some countries have issued relevant laws, regulations or measures recently to tighten the review of foreign investment. This indeed has affected some Chinese invested projects. We will follow the situations closely and assess the implications of relevant measures on Chinese outward investment. We’ve noted that a tighter security review on foreign investments is a recipe for global concerns over the investment climate of the country in question, especially over the abuse of such review. The rapid growth in Chinese ODI is as much a result of China’s economic growth as a reflection of high-quality development in the country. We believe that the general trend of Chinese enterprises going global will not change, our aspiration for mutual benefits, win-win results and common development with host countries will not change, and our efforts to boost global economic growth and benefit the peoples of the host countries will not change.

It is widely acknowledged in the world that we should uphold the rules-based multilateral trading system and make economic globalization more open and inclusive to bring benefits to all. Against this backdrop, some country’s flagrant use of unilateral and protectionist measures will have negative consequences for world economy. We will continue to encourage and support resourceful, trust-worthy and capable Chinese enterprises to go overseas and make investments according to market rules and international customs, and continue to advance investment liberalization and facilitation, safeguard legitimate interests of Chinese companies in host countries and create an open and fair business environment. Thank you.

CNR: Not long ago MOFCOM released during CIFIT the Report on Chinese Outbound Investment Development 2018. What are the differences between the Report and today’s annual statistical report?

Zhang Xingfu: Thank you for the question. I also released the report on Chinese outbound investment development during CIFIT. The two reports focus on different things. As Deputy DG Lu Shan just introduced, the annual statistical communiqué is an interpretation by Chinese authorities on the annual statistical results of Chinese outbound investment pursuant to international statistical standards, including basic information of investment, analysis of features and structures, among others. It is also a revision to snapshot figures for annual statistics. This communiqué is released jointly by MOFCOM, NBS, and SAFE while the ODI development report takes stock of Chinese ODI development comprehensively, such as development features, policies and measures, opportunities and challenges in the future, among others. The latter is released by MOFCOM. You are welcome to search for the ODI development report online if you are interested.

Economic Daily: DG Zhang, we’ve found that according to the statistical communiqué, Chinese ODI stock ranked second in the world in 2017, increasing by around USD 450 billion from the previous year, compared to just close to USD 160 billion of FDI flow. Why has the stock increased so remarkably?

Zhang Xingfu: Your question is very professional. Theoretically speaking, the ODI stock this year should be the sum of the stock of previous year and this year’s flow. But in practice, there are uncertainties over statistical work. For example, as we move forward with statistics on Chinese ODI, we include a more comprehensive scope of subjects and more new enterprises operation overseas. These newly-added investments, which were made in previous years, cannot be reflected in the investment flow of this year but can only be treated as increments of stock to ensure the integrity of our data. Henceforth, China’s rankings rose in terms of ODI stock in the end of 2017. On the one hand, we incorporated some natural persons’ foreign investment activities into stock. On the other hand, we examined relevant information on red-chip companies overseas and improved the stock data. Thank you.

Gao Feng: In the interest of time, you may raise questions through the information office to us. Our colleagues would be happy to respond to your questions. This concludes today’s conference. I want to thank our two speakers again, and wish you a happy National Day. Thank you all.

Zhang Xingfu: Thank you, friends from the media. Happy National Day!