China's outbound direct investment (ODI) surged 21.7 percent year-on-year to 68.81 billion U.S. dollars in 2010, growing for the ninth straight year and recording an average annual growth rate of 49.9 percent, according to a government report issued Tuesday.

Non-financial ODI climbed 25.9 percent to 60.18 billion U.S. dollars last year, while the country's overseas investment in financial sectors rose to 8.63 billion U.S. dollars, according to a report jointly released by the Ministry of Commerce (MOC), the National Bureau of Statistics and the State Administration of Foreign Exchange.

By the end of 2010, Chinese enterprises established 16,000 overseas companies in 178 countries, covering all economic sectors and focusing on six industries, including business service, banking, retail and wholesale, mining, manufacturing, and transport, the report said.

China's 2010 ODI accounted for 5.2 percent of global capital flows and exceeded the ODI of both Japan and the United Kingdom for the first time to become the fifth largest in the world, said Shen Danyang, spokesperson for the MOC, citing a report released by the United Nations Conference on Trade and Development.

MERGERS AND ACQUISITIONS

China's ODI has been increasing at a rapid rate since the global financial crisis in 2008, with investments reaching 180 billion U.S. dollars during the past three years, accounting for nearly 60 percent of the country's total ODI.

The country's outbound merger-and-acquisition (M&A) sentiment remained strong despite uncertainties in the global financial market.

The total value of M&A deals jumped 55 percent year-on-year in 2010, while the first-half of the year saw M&A deal values up 125 percent from one year earlier.

"M&A activities will continue to grow because Chinese companies have become more adept and sophisticated at acquiring assets overseas, even in the face of market turbulence," Deloitte Touche Tohmatsu Ltd. said in a report released Monday.

"By investing overseas, Chinese companies can acquire new technologies, create partnerships back at home and pave the way for their future investment in a target country," said Lawrence Chia, head of M&A services of Deloitte China.

Shen echoed his view, saying that not only state-owned enterprises, but also privately-owned companies are showing increasing willingness to invest abroad, driven by the need to secure raw materials from overseas and to escape from the overly crowded domestic market.

ODI in EU

China's ODI in the European Union (EU) surged 280 percent year-on-year in 2009. ODI more than doubled to reach 5.96 billion U.S. dollars last year, Shen said.

Shen attributed the fast growth to improved competitiveness of Chinese companies and government support.

He said the sovereign debt crisis in European countries was not the root cause of the fast growth in the country's ODI in EU. "China had actually increased its investments in the EU before the outbreak of the crisis," Shen said.

Despite the faltering global economic recovery and the escalating EU debt crisis, Shen said the current global economic situation still provided good opportunities for Chinese companies to invest abroad.

Shen said he believed China's businesses would be more welcomed to invest in EU countries in the future as such investment could boost Europe's weakened economies and generate jobs.