Despite a sharp dip in economic growth this year and next, Chinese investment in foreign companies should continue to surge as the country tries to lock in access to resources, a mining conference in Toronto was told on Monday.
Chinese foreign direct investment outside the financial sector hit $40.5 billion last year -- up from a measly $700 million in 2001 -- and should continue to climb for at least the next two years, Kobus van der Wath, managing director of business strategy firm Beijing Axis told the Prospectors and Developers conference.
This is one of the most important trends unfolding in the mining sector, and one that I think is likely to continue, he said in a presentation entitled China Inc is going global.
The sentiment should be welcome among the hundreds of capital-starved junior miners that have come to the conference to strengthen industry ties, look for financing opportunities, and explore partnerships with other companies.
Flagging global growth and tight credit markets have sapped demand for metals and limited financing options for explorers and developers of industrial metals.
While the growth slump will not spare China, the country's appetite for access to foreign resources has shown no signs of easing, van der Wath said.
He noted that foreign direct nonfinancial investment announced in February alone was $25 billion, due largely to state-owned Aluminum Corp of China's $19.5 billion investment in Australian miner Rio Tinto (RIO.AX: Quote).
On China's role as a top consumer of metals, van der Wath said China's expansion story is far from over, although he said said that in the short term, the country's trajectory is changing significantly.
He said growth should slide to 5.6 percent this year from a seven-year low of 9 percent in 2009. Growth should hit 7.5 percent in 2010, he said, but added that the forecasts could be too optimistic.
He said factors such as government stimulus measures and construction projects in the vast areas of Western China should continue to underpin expansion well above global growth levels. (Reporting by Cameron French; Editing by Peter Galloway)
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