Outbound investment principles will ensure ventures are rational

ON THURSDAY, the Ministry of Commerce released data showing that China's outbound investment dropped by about 40 percent in the first eight months of 2017. The ministry said this shows irrational outbound investment has been further curbed. Beijing Youth Daily comments:

The main reason for the decline in outbound investment is that domestic real estate, sport and entertainment enterprises did not have any new investment programs overseas this year. In the past two years, overseas realty, sport and entertainment investments were so popular that some Chinese companies invested at inflated prices. That phenomenon aroused concerns about irrational outbound investment at the end of last year.

It is China's national policy to encourage domestic enterprises to go overseas, trade with their foreign counterparts, and expand their global influence. However, that does not mean investing irrationally. Some enterprises invested heavily in the realty, sport and entertainment sectors at prices much higher than the market value, which involves high risks and raised suspicions that such investments were a means of transferring their assets overseas.