China's Overseas Investment Surges, Pivoting to Energy & Africa

Chinese foreign direct investment (FDI) abroad surged by 18% in 2025, reaching $124 billion in a clear strategic shift away from Western nations and toward emerging markets in Africa, the Middle East, and Asia. This marks the highest level of outbound investment since 2018, though it remains below the peak seen in 2016.

According to a report released Wednesday by the Rhodium Group, a New York-based research firm, this new wave of capital is overwhelmingly focused on energy and basic materials. The trend highlights how the world's second-largest economy is adapting to global trade tensions and rising resource demand.

Energy and Commodities Drive Investment Boom

Nearly half of all announced Chinese outbound investments last year targeted the energy sector—spanning both fossil fuels and renewables—and essential commodities. This surge is propelled by escalating trade and technology disputes between Washington and Beijing that have disrupted supply chains, as well as the growing energy needs of data centers worldwide.

"Energy and basic materials investment will continue [this year], partly because these sectors are naturally high-value and long-term in nature," noted Danielle Goh, a senior research analyst at Rhodium. "Commodities like these tend to attract follow-on investment over time."

In contrast, the automotive sector's share of Chinese FDI fell to its lowest point since 2020. The slowdown reflects a deceleration in new electric vehicle manufacturing and upstream supply chain projects abroad, even as Chinese firms continue to localize some production in regions like Eastern and Central Europe. However, the report notes that overseas markets are still primarily served by exports from China's domestic manufacturing base.

Mapping the Geographic Pivot to the Global South

The flow of Chinese capital has decisively turned toward Asia and sub-Saharan Africa. Asia received approximately $40 billion in new transactions, while Africa saw several landmark deals.

Key projects in 2025 that underscore this trend include:

• Guinea: Major investment in the Simandou iron ore mine.

• Nigeria: Two significant lithium processing plants.

• Indonesia: A $5.9 billion joint venture for a refining and chemical complex by Tongkun Group, Xinfengming Group, and Tingshan Group, one of the year's largest transactions.

Separate research from Griffith Institute Asia and Shanghai's Green Finance & Development Center confirms that China's Belt and Road Initiative (BRI) also remains highly active, with most funds directed toward mineral processing in metals and mining. In 2025, Kazakhstan emerged as the top recipient, securing about $25.8 billion for projects related to aluminum and copper.

Greenfield Projects Lead as M&A Activity Rebounds

While Chinese FDI remains dominated by greenfield investments focused on new manufacturing facilities, mergers and acquisitions (M&A) are making a strong comeback. After a steady decline from 2016, the value of M&A transactions has nearly doubled since 2022, partly driven by Chinese consumer goods companies expanding abroad.

Figure 1: Chinese outbound FDI from 2021-2025 shows a consistent rise, with greenfield projects accounting for the majority of growth while acquisition activity has recently gained momentum.

The Rhodium report also highlighted that Chinese firms have leveraged capital made available from the deleveraging of the domestic property sector to expand manufacturing capacity at home, which continues to outpace overseas investment.

The Retreat from Western Markets

The pivot toward emerging economies coincides with a sharp decline in investment in developed nations. According to Rhodium, North America, Europe, and Oceania now account for less than 20% of total announced Chinese FDI, a drop of roughly 70% from 2016 levels.

This retreat is a direct response to increasing scrutiny and protectionist policies from Western governments. Germany has blocked several Chinese acquisition attempts, and Switzerland recently passed legislation to screen Chinese investments in strategic industries.

US Market Sees Heightened Caution

Chinese companies have become particularly guarded about investing in the United States amid rising geopolitical tensions. Last year, the White House instructed the Committee on Foreign Investment in the U.S. (CFIUS) to intensify its reviews of Chinese investments in advanced technology, infrastructure, and farmland.

This cautious environment has led to a reluctance to commit significant capital. "There's growing risk that projects may not ultimately move forward, so Chinese companies have been reluctant to invest heavily," said Goh.