China's investment pattern echoes that of big Japanese companies in the late 1980s. The Japanese bought everything from automotive and electronics companies to Columbia Pictures and New York's Rockefeller Center. Japan's foreign direct investment grew 53% between 1986 and 1989 following appreciation of the yen and liberalization in key foreign markets.
But Japanese investment in the U.S. met with a backlash from a competitive American public along with shaky profits. Japanese direct investment in the United States reached $159.7 billion by 2000 but had fallen to 47.4 billion by 2002.
China's money has largely been welcomed so far. Chinese firms looking to invest offshore tend to find eager foreign partners, a chance to earn a name among consumers overseas and grow wiser about the laws, procedures and business cultures of other countries.
"I have had a Chinese investor wanting to buy an international insurance business because he wanted his colleagues in mainland China to be seen as 'intellectually superior' to others in their competitor set," said James Berkeley, managing director of the London-based management advisory service Ellice Consulting.
Stock pickers should watch the spiraling global maturity of Nasdaq-traded Chinese multinationals such as Bank of China (BACHY), which will help provide $462 million in financing for a tourism complex in the Dominican Republic, and Cnooc (CEO), which in 2011 entered a $570 million tie-up with Chesapeake Energy (CHK) to develop shale gas fields in the United States.
Many of China's top property developers are not listed in the United States, but investors keen to capitalize on Chinese-funded real estate projects may park money in a fund such as the Guggenheim China Real Estate ETF (TAO) or the Asian regional iShares Asia Developed Real Estate ETF (IFAS).
Foreign partners of Chinese firms stand to grow revenues, as well. Watch the shares, for example, of Carillion (CIOIF), a British construction company working with Beijing Construction Engineering Group on a $1.26 billion development near the Manchester city airport.
The advantage to foreign companies comes down to "fresh, unencumbered sources of capital and discretionary expenditure," Berkeley said.