Mining for China's Outbound Direct Investment

With double digit GDP growth since 2003,¹ China is the world's fastest-growing major economy, the world's fourth-largest economy and set to become the world's largest by 2025.² This meteoric rise through global ranks has helped produce the world's largest foreign exchange reserve at US$1.81 trillion³ and positions China as an economic powerhouse.

    With pockets full, China is actively supporting its domestic entities to explore overseas opportunities, particularly in the energy and resources sector. Given China's ever-growing appetite to fuel industrialisation and continued growth, this is not suprising. At current rates of depletion, only 21 of the 45 minerals with proven reserves in China will meet domestic demand by 2010, reducing to six by 2020.⁴ Mining investment outflows already totalled US$8.54 billion⁵ in 2006, representing 40.4% of the nation's entire outbound direct investment (ODI). Even with most of these outflows being acquisitions of stakes in foreign companies by state-owned enterprises (SOEs), more still needs to be done to ensure a sufficient supply of raw materials to build China's infrastructure.

    Naturally resource-rich Australia and Canada have become prime targets for China's wandering eye for energy and reserves. In 2006, Canada was the top destination for global mineral exploration, capturing 19% of world spending, followed by Australia at 11%.⁶ Canada is also the third-largest producer of natural gas in the world and is second only to Saudi Arabia in proven reserves for natural gas from oil sands.⁷ Australia is China's largest source for iron ore and alumina, the second-largest for coal and the fourth-largest for copper ore.⁸