China’s overseas investment continued to grow in 2018, rising by 4.2% on year to total $129.8 billion, according to the latest Ministry of Commerce (MoC) figures published on January 16. Significantly, Chinese non-financial outbound investment in countries which have joined Beijing’s Belt and Road Initiative (BRI) grew twice faster to rise by 8.9% compared with 2017, the data show.
In parallel, China’s non-financial outbound direct investment amounted to $120.5 billion in 2018, within which some $15.6 billion was fresh funding injected into 56 BRI countries, accounting for 13% of the total, MoC noted.
How much of last year’s Chinese investment abroad was allocated for upstream or downstream steel production the data does not show. But it is known that some Chinese steelmakers, struggling at home with restrictions on introducing new capacity, are being attracted to the idea of expanding production offshore, with the central government’s promotion of BRI seen as a means to helping them realise their ambitions.
Late last year, for example, the Provincial Government of North China’s Hebei Province the country’s biggest steel-producing province – unveiled a plan whereby by the end of 2020, the government hopes that local steelmakers under its jurisdiction will have expanded their steel-making capacity overseas to 12 million tonnes/year.
New investments in overseas steel capacity by Hebei mills is tipped for several countries including Indonesia, Malaysia, Philippines, Thailand and India.
As of now, steel mills based in Hebei have built or acquired eight steel projects offshore whose total steel-making capacity is 6.35 million tonnes/year. These include the Hebei Iron & Steel Group’s 2016 acquisition of Serbia’s Smederevo Steel, a steelmaker with 2.2 million t/y crude steel capacity. Serbia is also a major country along the BRI Route.
But Chinese steelmakers are already benefiting indirectly from the growth in BRI Investment by providing steel materials for projects being actioned by Chinese firms abroad. The MoC’s data showed that during 2018 the value of new overseas engineering and construction contracts won by China in 63 BRI countries totalled $89.3 billion.
BRI country projects accounted for 52% of all Chinese offshore engineering and construction contracts secured last year.
In its statement, MoC said these contracts – especially for projects involving transportation, civil construction and electricity generation plants – can also help to spur growth in Chinese exports. Material supplies to Chinese overseas engineering and construction activities last year contributed $17 billion in export value, up 10.4% on year.
“Since 2016, we have been benefiting more and more through fulfilling supply contracts for building construction projects in overseas markets,” admitted an agent located in East China’s Shanghai responsible for supplying steel to Chinese offshore projects. “In 2018 our overall business performance was better than in 2017 but the steel export volume didn’t show a sharp increase, mainly because of the relatively high export prices of Chinese steel in Southeast Asia which made our steel less competitive.”
China’s exports of steel reached 69.3 million tonnes in 2018, representing a decline of 6.1 million tonnes or 8.1% on year, according to the latest data from China’s General Administration of Customs released on January 14.