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.