While China invests heavily in developed countries, it has relied mainly on construction contracts to expand its presence in the developing world, analysts say.
The distinction between investing and contracting may be key to understanding China's approach to its major "One Belt, One Road" (OBOR) initiative, the U.S. $1-trillion (6.7- trillion yuan) plan to recreate Silk Road trade routes through Asia and Africa to Western markets.
According to a recent report, China has recorded more than U.S. $1.6 trillion (10.8 trillion yuan) worth of deals under the broad category of foreign investment since 2005, including some U.S. $137 billion (924 billion yuan) in the first half of this year.
But only a portion of the huge total represents real investment.
A substantial share — at least U.S. $691.6 (4.6 trillion yuan) since 2005 — is actually the reported value of large engineering and construction contracts, primarily in developing economies.
The outbound investment and foreign contract categories are often lumped together to give a complete picture of China's influence, said the report by the China Global Investment Tracker, compiled by the Washington-based American Enterprise Institute (AEI) and the Heritage Foundation.
But the distinction may be important to understanding the extent of China's growing global reach.
"Investment brings full or partial ownership of an asset," wrote AEI resident scholar Derek Scissors in an analysis.
"In many nations, China has signed contracts worth billions and brought in thousands of workers, but there is no ownership," he said.
The contracts cover hundreds of construction projects, including rail lines, dams and power plants, in which China does not have equity stakes.
As large as it is, the tally may understate the value of Chinese contracting, since the monitor only lists projects of at least U.S. $100 million (675 million yuan) since 2005.
Contracting has been the main vehicle of China's involvement in developing countries, often exceeding the value of real investment.
"The much-touted Belt and Road initiative is an investment dud, but construction is considerable," Scissors said.
In Pakistan, for example, where China is building a major "economic corridor," contracting valued at U.S. $38.3 billion (258.5 billion yuan) accounts for 78 percent of China's total investment and contract activity.
By contrast, contracting represents a relatively minor portion of China's dealings in developed countries, where it faces greater competition and resistance.
While contracting has been China's main conduit in OBOR countries, it can also lead to debt obligations and a more permanent presence in the developing world.
The issues of debt and development came to a head in Sri Lanka on Saturday as the country's port authority signed a controversial U.S. $1.1-billion (7.4-billion yuan) deal, giving China effective control over its southern Hambantota port on a key OBOR route.
Under the agreement, China Merchants Port Holdings will take a 70-percent stake in a joint venture with the Sri Lankan authority and a 99-year lease on the port as part of a plan to convert U.S. $6 billion (40.4 billion yuan) in Chinese loans into equity, Reuters reported.
"We thank China for arranging this investor to save us from the debt trap," the Sri Lankan port minister, Mahinda Samaraasinghe, was quoted as saying.
The deal has been resisted by opposition parties and has raised concern that the port could be used by Chinese naval vessels, Reuters said.
China's investment in Western countries has focused on high-value acquisitions in sectors including technology, real estate and entertainment.
The United States has been the leading destination for Chinese investment, nearing U.S. $170 billion (1.1 trillion yuan) over the past 12 years.
Although U.S.-bound investment fell by some 50 percent from a year earlier in the first half of 2017, it still reached U.S. $17 billion (114 billion yuan), the tracker said.
China's worldwide outbound investment rose 9 percent so far this year to U.S. $97.1 billion (655.2 billion yuan), but much of the increase was due to a single acquisition of the Swiss-based seed giant Syngenta, which was finalized during the period.
Without ChemChina's U.S. $43-billion (290-billion yuan) deal, China's investment would have dropped by about one- third, thanks in part to tighter capital controls, the study said.
On Monday, a Ministry of Commerce official cited a 42.9- percent decline in first-half oubound investment to 331.1 billion yuan (U.S. $49.4 billion). Investment in OBOR countries fell 3.6 percent, said Vice Minister Qian Keming.
The focus on contracts instead of investments in developing countries may provide clues to China's strategic intentions in promoting OBOR and other foreign economic initiatives.
The comparatively low level of investments and ownership interests raises the question of what China wants in OBOR countries.
Is China only using its vast construction resources to build overseas infrastructure for trade, while keeping its surplus of contractors employed? Or is it establishing a permanent footprint for strategic purposes in the developing world?
In an email exchange, Scissors was asked whether Chinese contracting and construction in OBOR countries might be only a prelude to investment later on.
"If construction is a prelude to investment in OBOR countries, it's a long prelude," said Scissors.
"Chinese companies often prefer investment, but with their smaller economies, most developing countries can't stomach the idea of large-scale Chinese ownership of their assets," he said.
While some OBOR countries may experience an economic boom that would make large-scale Chinese investments "less intimidating," most will want high volumes of construction rather than investment for years to come, Scissors said.
The database of the China Global Investment Tracker has identified U.S. $98 billion (661 billion yuan) of Chinese investment in 64 OBOR countries since 2014.
The list of countries for Chinese construction contracts is led by Pakistan, followed by Nigeria, Indonesia, Saudi Arabia and Algeria.
Outbound investment pattern
The recent pattern of China's outbound investment has been inconsistent as regulators seek to balance orders to control financial risks and debt growth with the Communist Party's story line of strong economic performance ahead of the critical 19th National Party Congress in the fall.
Despite the deep decline in first-half investment reported by the Ministry of Commerce, Chinese companies have invested in more than 3,900 overseas enterprises in 145 countries so far this year, the official Xinhua news agency said.
The pace of reported overseas deals slowed markedly after government agencies warned last December that they would closely monitor "irrational" investments in sectors including real estate, hotels, entertainment and sports.
The curbs coincided with tighter capital controls, prompted by declining foreign exchange reserves earlier in the year. But after months of forex stability, the investment pace has resumed at a reduced level.
According to the New York-based Rhodium Group, the number of newly-announced Chinese merger and acquisition deals abroad dropped 20 percent in the first half of 2017 from the year-earlier period, mostly due to a first-quarter slowdown.
Double-digit growth in transactions returned in March and April, while more than 20 new overseas deals with a value of at least U.S. $5 million (33.7 million yuan) were reported in both May and June.
The average deal size has fallen "dramatically" since last year, Rhodium said in a research note. While China signed deals worth U.S. $3 billion (20.2 billion yuan) or more at the rate of one a month in 2016, there were only two of that size in the first half of this year, it said.
In an apparent reaction to the abrupt slide in outbound investment, the National Development and Reform Commission (NDRC) announced on July 19 that regulators will lift some restrictions, while continuing to discourage speculation in foreign real estate, hotels, entertainment and sports.
A spokesman for the planning agency said scrutiny would be eased for investment risks taken by "small parent companies with large subsidiaries and by new enterprises established in a short period of time rushing to go global," the official English-language China Daily reported.
The steep drop in China's outbound investment has been hard to reconcile with its intense promotion and investment promises in May at the Belt and Road Forum in Beijing.
China's outbound investment was expected to total U.S. $600 billion (4 trillion yuan) to $800 billion (5.4 trillion yuan) over the next five years, said NDRC Vice Minister Ning Jizhe at the time.
If overseas investment continues at this year's first-half rate, it would fall far short of those marks.