EXECUTIVE SUMMARY

1. • Between 2003 and 2011, ASEAN saw an increase of China's inward investment from US$0.12 billion to $5.9 billion, with total accumulation being $22.1 billion by the end of 2011, and ASEAN's share in China's total OFDI rose from 4.1% to 7.9%.

2. • The expansion of China's OFDI in South East Asia may have been due to the deepening economic integration fostered by ASEAN countries; ASEAN's rising ability to attract FDI; the implementation of the China-ASEAN Investment Agreement, as well as China's domestic industrial restructuring and its rising labor costs.

3. • One of the most reported motivations for Chinese OFDI in the international media and in some academic writings is China's hunger and need to secure natural resources to fuel its rapid economic growth. Yet, Chinese OFDI in Southeast Asia shows that the importance of seeking market opportunities and regional labor-division is greater than the importance of obtaining overseas resources.

4. • For CLMV (Cambodia, Lao, Myanmar and Vietnam), Chinese OFDI is more appreciated as this export-oriented FDI tends to generate more employment, facilitates, and better access to the global economy via export spillovers.

5. • From regional perspective, China's FDI in Southeast Asia, especially in energy sectors will enhance energy cooperation between China and ASEAN countries. There is great potential and room for Chinese investment flowing to those sectors like clean energy, low-carbon technologies and energy efficiency.

INTRODUCTION

In the early 1990s when China started increasing its OFDI (outward foreign direct investment), ASEAN countries were receiving only around 3% of their northern neighbour's total investments. That has changed dramatically since then.

According to statistics made available by China's Ministry of Commerce, Chinese investments in ASEAN jumped from US$0.12 billion to $5.9 billion between 2003 and 2011, with total accumulation reaching $22.1 billion by the end of 2011. ASEAN's share in China's total investments overseas almost doubled, rising from 4.1% to 7.9%. This has been a recent development though. Compared to the previous year, China's OFDI in ASEAN for 2011 increased by 34.1%. This can be relevantly compared to increment levels for that same year for other major trading partners—EU ($7.6 billion) increased by 26.8%, the US ($1.8 billion) by 38.5%, and Russia ($7.2 billion) by 26.1%.