How China’s global investment model is changing – and what it means for the yuan

Foreign direct investment (FDI) has been a crucial pillar of China’s economy since it opened up, drawing in trillions and helping fuel its rise as the “world’s factory”. But outbound direct investment (ODI) has expanded rapidly over the past two decades, transforming the country into a major exporter of capital.

Today, China’s outbound investments exceed inflows, and the country has consistently ranked among the top three global investors in recent years.

In this explainer, the Post examines the drivers behind China’s rise as a capital exporter, how its overseas investment model has evolved and what this could mean for the internationalisation of the yuan.

What is driving China’s ODI growth?

China’s overseas investments have climbed steadily in recent years, rising 8.4 per cent year on year to US$192.2 billion in 2024. As domestic growth slows and the trade environment becomes more uncertain, Chinese firms have pushed ODI close to the record highs seen in 2016.

This trend is likely to continue over the next few years as companies seek to diversify income sources amid weak domestic demand and intense price wars at home, according to a June report by Moody’s Ratings.

Stronger policy support – including financial aid, tax subsidies and advisory services – is also expected to boost outflows, the report’s authors said, adding that investments are likely to target emerging markets amid trade uncertainties.

Chinese investment in Southeast Asia, for instance, surged by 36.8 per cent in 2024 – mainly concentrated in manufacturing – according to the government’s latest statistical bulletin. This has helped firms tap the region’s growing domestic markets and hedge against external headwinds from the US-China trade war.

Beijing has signalled it will maintain this outward focus. At its fourth plenum in October 2025, which set the tone for economic policy over the next five years, the Central Committee of the ruling Communist Party pledged to safeguard the multilateral trade system and expand two-way investment cooperation, reinforcing ODI as a strategic priority alongside attracting FDI.

South China Morning Post