We’re barely into the second quarter of 2008 and already China’s total outbound investment is closing in on the full-year total for 2007. Spending currently stands at US$24.52 billion (from 56 deals), up 1,000% on this point last year, according to Thomson Financial. The full-year figure for 2007 was US$29.84 billion (from 219 deals). In 2004, outbound investment came to just US$3.92 billion.

Obviously, this year’s numbers are skewed quite horrifically by Aluminum Corporation of China’s (Chinalco) US$14.28 billion investment in mining giant Rio Tinto (made through a subsidiary with a little help from Alcoa of the US). If there is anything to these rumors about Baoshan Iron & Steel seeking a 9% stake in BHP Billiton, the numbers would be skewed even more.

Aside from the focus on metals and mining (which is unsurprising given the current macro climate), recent deals are notable for their relative smoothness and sophistication. It is all a far cry from China National Offshore Oil Corp’s unsolicited and poorly prepared bid for US oil group Unocal in 2005.

Chinalco brought Alcoa on board as it helped preempt suggestions that this was another state-driven resource grab (which, to a certain extent, it was). This is a bona fide commercial move with a bone fide commercial partner, the could say. Structurally, this is not something that was conceived overnight.

As was highlighted in our cover story in March, Industrial and Commercial Bank of China’s purchase of a 20% stake in Standard Bank of South Africa for US$5.6 billion was three years in the making.

China Investment Corp, the country’s sovereign wealth fund, paid US$5 billion for a 9.9% stake in Morgan Stanley and US$3 billion for 10% of private equity firm Blackstone. Rather than create unrest within the US political community, these investments (and the subsequent losses incurred) have provoked domestic criticism of the government’s strategy. “They’re just stupid,” a Chinese dealmaker told me last month.

For more on Chinese outbound investment - with particular reference to acquisitions in the US and how one recent deal (Huawei’s bid for 3Com in alliance with Bain Capital) did go wrong - please see this special report from our April issue.

Highlights from the last week of China business news.

IPO safe havens
The A-share market isn’t doing so well these days, and regulators have their hands full. It wasn’t so long ago that the CSRC was encouraging mega-IPOs to soak up liquidity in the soaring A-share markets. Now, they’re saying the opposite, telling Ping An, for example, to cut back its planned share and bond offering. Investors are piling into IPOs and ditching buying on the secondary market, as China Railway Construction Group’s US$3.1 billion Shanghai listing proved - the retail tranche was 155 times oversubscribed. The chronically underpowered SEPA actually aided the CSRC by delaying 10 domestic listings last year due to non-compliance with environmental rules. Two of the companies seeking listings have yet to be approved for IPOs.

Pitching in
Everyone needs China’s help these days. US Secretary of State Condoleezza Rice came to Beijing to ask President Hu Jintao to exert more pressure on recalcitrant neighbor North Korea to get rid of its nuclear program. There’s also Sudan, China’s troublesome trading partner. The Chinese special envoy has been dispatched to the country to find a solution to its ongoing civil strife (some say genocide). If you remember, he got on the plane just days after Steven Spielberg (who did Schindler’s List - and ET) quit his advisory role with BOCOG to escape being tarred by the genocide brush. As the Sudan-Olympics-genocide pressure builds, China will be looking for ways to relieve the pain. One of those remedies is to resume bilateral human rights talks with the US: during Rice’s visit, China said it was interested in doing just that. We speculate that this announcement probably didn’t rank among the personal highlights of the meeting for President Hu.

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James Fallows has an excellent article in the just-posted January/February issue of The Atlantic that examines the complex and often misunderstood issues surrounding China’s mountain of US-dollar reserves. It is probably the most patient, jargon-free and, above all, clearest explanation of the issue I have read.

Among the issues elucidated are what China’s high savings rate means (and doesn’t mean), the prickly situation created by the plunging dollar, and the challenges ahead for CIC, China’s new sovereign wealth fund charged with investing some US$200 billion of that money (a third of which is to be invested overseas). The article, which can be found here (on the free portion of the site, for once), is especially helpful in highlighting the potentially very dangerous co-dependent nature of the Chinese and American economies. Well worth a read.