RCEP Countries Lead in Chinese Q2 BRI Outbound Investment

Posted by Written by Dezan Shira & Associates Reading Time: 3 minutes

RCEP-Countries-Lead-In-Chinese-Q2-BRI-Outbound-Investment

The RCEP nations of ASEAN, in addition to Japan and South Korea, were big winners in Q2 Chinese investment 2021, according to research from China Investment Research. Q2 2021 announced China investments/pledges were US$16.6 billion, down US$24 billion from Q1 2021, but still well above both Q3 and Q4 2020 levels. At the Q2 rate, China appears to be reverting back to the 2019/2020 outbound pace of circa US$60 billion, roughly a quarter of 2016’s US$222 billion outbound.

This indicates that the mass expenditure of China’s Belt and Road Initiative has taken place, with projects now being chosen on a more strategic and cashflow generating basis than pure infrastructure build. However, as seen in prior quarters, virtually all investments were below US$50 million – as China’s focus has become providing growth capital via minority stakes and financing Joint Ventures and new drug discovery on a global basis. 

There was also a regional shift to the RCEP nations – the ASEAN countries, in addition to Australia, New Zealand, Japan, and South Korea. This free trade deal is expected to come into effect from January 1st, 2022 but has not yet been fully ratified. China appears however to be making investments to take advantage of the upcoming deal. 

Geographically, Asia received 42.2 percent of China’s Q2 total M&A/equity investment volume. Hong Kong continues as the clear leader, followed by Singapore, Japan, and South Korea.

Examples of this shift to RCEP are as follows: 

  • Genfeng Lithium formed an Australian JV in lithium, investing US$600 million in the JV; 
  • ESR and GIC (Singapore) combined to acquire Blackstone’s Australian logistics assets for US$2.9 billion/ US$1.45 billion each;
  • A Chinese consortium of Hillhouse Capital, Boyu Capital, and Sequoia Capital China invested US$1.8 billion for a minority stake in J&T Express, a Malaysia based logistics and courier service; and
  • Huayou and EVE Energy agreed to acquire a 37 percent stake for US$770 million and to partner with Tsinghan, the biggest nickel producer in Indonesia and the world’s top stainless-steel maker in building a new plant focused on nickel and cobalt. It also agreed to acquire an estimated 20 percent stake for US$250 million in a nearby battery plant (total $1.02 billion). 

The average transaction/investment size for the 178 transactions/investments with disclosed values was US$93.3 million. 

The Consumer sector also saw investments across several sub-sectors: retail and controlling stakes in Hong Kong and Japanese food; and controlling stakes in cosmetics (South Korea). China made investments into an esports investment in the Philippines, while Ecommerce was particularly interesting; US$400 million was placed into a leading Vietnam-based platform; and US$71 million into an Indonesian platform. Again, these will encourage regional Ecommerce and free trade. 

Renewables/energy continued to increase in volume although amounts remained small. There were new energy investments in Hong Kong and Australia.  Logistics saw less than two percent of volume but saw Chinese parties proving growth capital to logistics companies in Malaysia (US$1.8 billion) and Thailand (US$50 million) as well as the acquisition of a Hong Kong logistics company for US$200 million.

In mining and minerals, Chinese firms made sizeable lithium investments in Australia, while Huayou and EVE Energy agreed to acquire a 37 percent stake in a major Indonesian nickel mine. 

Unlike the initial years of the BRI, there were no major investments into utilities, reinforcing our view that Belt and Road 1.0 is virtually built – with the focus now on the Digital, Health, and Green Silk Roads, and a specific, if not exclusive focus on the RCEP region. 

We are grateful to Henry Tillman for allowing us to reproduce this interview. China Investment Research may be contacted here.


About Us

ASEAN Briefing is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia and maintains offices throughout ASEAN, including in SingaporeHanoiHo Chi Minh City, and Da Nang in Vietnam, Munich, and Esen in Germany, Boston, and Salt Lake City in the United States, Milan, Conegliano, and Udine in Italy, in addition to Jakarta, and Batam in Indonesia. We also have partner firms in Malaysia, Bangladesh, the Philippines, and Thailand as well as our practices in China and India. Please contact us at asia@dezshira.com or visit our website at www.dezshira.com.

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