In Depth: Where Chinese Overseas Investment Is Heading

[para. 1] Emerging markets are increasingly attracting Chinese investments, as Western countries impose stricter regulations. These investments primarily target strategic sectors such as new-energy vehicles (NEV), semiconductors, technology, and infrastructure. Countries like Turkey and Hungary, known for their automotive manufacturing capabilities, are now courting Chinese investments in EV production. Meanwhile, Malaysia is attracting Chinese semiconductor firms by diversifying its economic strategies, and Saudi Arabia is seeking partnerships with Chinese companies to develop its technology, e-commerce, and tourism sectors in an effort to reduce its reliance on oil.

[para. 3] To entice Chinese investors, these emerging markets are crafting favorable investment environments by offering incentives, relaxed regulations, and tax benefits. This is a distinct contrast to the rising trade and technology barriers in Europe and the U.S., as highlighted in Ernst & Young’s 2024 China Overseas Investment Overview report.

[para. 4] The shift of Chinese investments toward emerging markets signifies a realignment in global economic relationships. In 2024, China's outward direct investment surged by 10.1% to reach $162.8 billion. A substantial portion, over 20%, of these investments was directed toward countries involved in China’s Belt and Road Initiative, with a 13% increase observed in Southeast Asian nations.

[para. 5] In Central Europe, Hungary is leveraging its established automotive industry to position itself as a key hub for new energy manufacturing by attracting Chinese companies. Prominent companies such as Contemporary Amperex Technology Co. Ltd. (CATL) and BYD, the global EV leader, are establishing battery and NEV factories near Hungary to serve German automotive plants. Hungary has become the top destination for Chinese investments, with these accounting for nearly half of the total foreign investment in the country in 2024.

[para. 6] Turkey is also aggressively working to attract Chinese auto manufacturers, offering government incentive programs for substantial investments. BYD is planning a $1 billion factory in Turkey, enhancing the country's automotive production capacity. Moreover, Morocco has secured a $366 million investment from BTR New Materials Group Co. Ltd. for lithium-ion battery materials production, reinforcing its position in the global lithium battery sector.

[para. 8] Southeast Asian countries are similarly engaging Chinese carmakers to drive their industrial development. Thailand is aiming to increase its output of "zero-emission vehicles" and is thus attracting Chinese NEV manufacturers. Malaysia is likewise leveraging China’s supply chain to transition quicker to NEVs, pushing national brands Perodua and Proton in this direction.

[para. 9] Beyond automotive cooperation, Malaysia seeks technological transfers in high-value sectors from China, emphasizing the integration of Chinese chip manufacturers due to the country’s semiconductor capabilities. This has been part of a broader pivot from processing trade to advance into high-end manufacturing like semiconductors.

[para. 10] Middle Eastern countries are diversifying away from oil dependence by attracting Chinese investments in renewables and technology. Significant investments include renewable energy ventures in Saudi Arabia, while Chinese tech firms like Tencent Cloud, Lenovo, and J&T Express are establishing operations in the region. Saudi Arabia, focused on Vision 2030, is also enhancing its tourism sector with Chinese investments.

[para. 15] Although geopolitical conflicts pose challenges, nations like Morocco are attracting Chinese investment by offering a stable political and business environment. Similarly, countries like Hungary and Turkey offer competitive incentives and tax benefits to lure Chinese companies, seeking to be the prime destinations for such investments.

In summary, as Western markets tighten regulations, emerging economies are increasingly becoming attractive destinations for Chinese investments, particularly in sectors like NEVs, semiconductors, and technology. This trend is revitalizing global economic alliances and fostering regional industrial development, with countries offering appealing incentives to secure these investments.