How Different Are Chinese Foreign Acquisitions? Adding an Indian Comparison

China’s outward foreign direct investment (OFDI) has developed extremely rapidly over the past few years, rising from US$2.5 billion1 in 2002 to US$26.5 billion in 2007. Between 1978 and 2002, the accumulated value was US$30 billion, rising to US$57.2 billion by 2005, US$73.3 billion by 2006, and US$117.9 billion by 2007. By the end of 2007, a total of 7,000 Chinese firms had invested in 173 countries (MOC 2008). By 2008, China (including Hong Kong) had become the seventh largest source of OFDI worldwide, Chinese OFDI flows overtaking those of Japan (UNCTAD 2008). In addition to establishing new plants and subsidiaries overseas, Chinese firms have been rapidly acquiring well-known firms worldwide as a new form of transnational investment. Outward foreign acquisitions began in the late 1990s, logging US$344 million (nonfinance FDI) in 2000 and US$507 million in 2001. It jumped to US$2.8 billion in 2002, but subsequently fell to US$1.6 billion. However, since 2004 there has been an unprecedented rise, to US$3.9 billion in 2004 and US$6.5 billion in 2005, 53% of the total OFDI of the year (MOC and State Statistics Bureau 2006, 11). Outward acquisitions by Chinese nonfinance firms rose to US$15.8 billion during the first half year of 2008—61.6% of the total (MOC 2008). Table 10.1 lists the details of these acquisitions between 2004 and 2008.