What is direct investment abroad?
Foreign Direct Investment (ODI) is a business strategy in which a domestic company expands its operations to a foreign country. This can take the form of an investment in a green field, a merger / acquisition or the expansion of an existing foreign facility. The use of foreign direct investment is a natural progression for companies if their domestic markets become saturated and better business opportunities are available abroad.
Understanding foreign direct investment (ODI)
The size of a country’s direct investment abroad can be taken as an indication that its economy is mature. American, European and Japanese companies, for example, have long made significant investments outside their home markets. Due to their faster growth rates, emerging market economies often receive large amounts of ODI, as China has done in the past two decades. But even some emerging countries have started investing abroad. Chinese companies are now engaged in large-scale foreign direct investment. In 2020, Chinese investment abroad exceeded foreign direct investment (FDI) in China for the first time. In 2020, Chinese companies invested more than $ 170 billion overseas.