(Yicai) Dec. 6 -- Cross-border investment around the world is on track to rebound from its current downturn and grow at a moderate rate in 2025, the chair of the World Investment Conference’s executive board told Yicai during the 28th World Investment Conference.

The recovery will be fragile and will come with higher risks, as this round of growth will primarily be driven by industrial transformation and geographical adjustment rather than large-scale capacity expansion, said James Zhan, who is also co-chair of the Global Alliance of Special Economic Zones.

Trade frictions have a dual impact on international economic and trade relations, hindering trade while also stimulating the generation and relocation of cross-border investments, said Zhan, who previously served as chief advisor to the director of investment and enterprise at the United Nations Conference on Trade and Development and editor-in-chief of the UN World Investment Report. To avoid trade barriers, multinational investments by export-oriented companies will become more active and move faster.

The first round of trade wars initiated by the US in 2018 has already prompted some exporters to relocate from China to Southeast Asia and Mexico, Zhan said. Given that future export routes through these regions may also face obstacles, it is anticipated that the direction of global cross-border investments will further diversify, especially towards countries with close trade ties to Europe and the US.

The chief recipients of Chinese companies' overseas investment would be Global South countries, which refers to those countries whose economies are not fully developed, he said. Exports to major trading partners will be achieved through multi-location production and transshipment, leading to increased operating costs.

There will be varying levels of activity in cross-border investment across different industries, Zhan said. For instance, investments in the field of artificial intelligence are expected to be more active, and that in industrial robot manufacturing are also projected to expand. Such cross-border investments are likely to occur mainly in developed countries and relatively advanced developing countries.

The model of cross-border investment is undergoing significant changes, Zhan said. To mitigate geopolitical risks, many firms engaged in cross-border investments are now avoiding or reducing heavy asset investments, showing a trend of shifting from equity investment to non-equity investment.

Before, overseas investments by companies would start with the purchase of heavy assets like factories and equipment, while the current trend sees firms not purchasing production materials on a large scale locally but opting for leasing models instead, especially in risky countries, he said. They are also exploring production license provision to local companies to enable manufacturing, thereby transforming cross-border equity investment into non-equity operations.

Editor: Kim Taylor