A recent report by the State Council, China's Cabinet, says the country became a net capital exporter in 2015. In terms of outward foreign direct investment, it was second only to the United States.
Outward FDI amounted to only a fraction of China's inward FDI before 2003. Since then, especially in the past decade, it has witnessed rapid growth. If Chinese enterprises' current overseas investment momentum is maintained, China could replace the U.S. as the world's largest overseas investor in a few years.
China has made various kinds of investments in more than 180 countries and regions for more than 20 years. These investments overseas have fetched huge profits every year and thus constitute an important part of China's annual economic returns.
Outward FDI in recent years has helped Chinese companies to acquire a number of good enterprises overseas. In particular, the purchase of equities of manufacturers of some important components and parts－including those in Europe after the global financial crisis－has helped China improve its domestic manufacturing technologies and craftsmanship.
But some Chinese overseas investors have focused mainly on acquiring commercial real estates, or entertainment and financial assets.
Past and present practices in the international capital market tell us that such asset bubbles, once they burst, would cause investors huge losses. Worse, many private investors have made overseas investments on high-leverage loans from domestic banks.
The explosive growth of outward FDI by Chinese enterprises does conform to the "going global" strategy and also the Belt and Road Initiative to better connect China with other countries. But the authorities should still be vigilant against blind or reckless investment moves.
They should also improve the market order at home, because it might prevent domestic investors wary of the domestic market environment from shifting their sights overseas.
