China on Foreign Shopping Spree, McKinsey Says

Last Updated Jun 13, 2008 12:46 PM EDT

With all the talk of outsourcing to China, there is more evidence that China is expanding overseas. McKinsey & Co. reports that China doubled its direct foreign investments to $26 billion in the first quarter of 2008 compared to the first quarter of 2007.

McKinsey notes that China had long been expected to start making plays overseas, but had been slow in doing so. Now it appears the buying and investment spree is on. Reasons for it include that China has a great amount of univested cash and that depressed stock markets around the developed world are making for some good buys. Plus, China's enormous and growing economy needs access to more raw materials and new markets.

A side note: The Wall Street Journal has a good piece today noting the boomerang result of quickly rising fuel prices. It costs significantly more to ship a container of cargo from China to the U.S. or elsewhere. Since January, the cost of shipping a 40-foot container from China has gone up 15 percent and some believe it could double if oil prices head towards $200 a barrel.

Such expenses undercut Chinese competitive advantages and are encouraging some U.S. firms to relocate operations back home. If that keeps happening, China's foreign investment spree could slow, but since they have so much money, it may take a while.