Oil and Beyond: China’s Expanding Global Footprint

When Chinese Xiaomi launched its first EV models last month, it sold more than 300,000 cars in a matter of three days. The electronics giant is eyeing international shipments in two years.

Sinopec, meanwhile, is drilling for oil in Kazakhstan. The two are part of a growing trend: China is going global. There’s just not enough growth potential at home.

This is what credit ratings major Moody’s said in a new report this week, noting that it expected the Chinese government to add fuel to the international expansion through financial support in the form of subsidies and tax cuts.

“A successful expansion in overseas income could boost China’s GNI [gross national income] and help offset the negative economic impact of weaker export demand, driven by trade tensions, or subdued domestic demand stemming from weak consumer sentiment,” the team that produced the report wrote.

The latest export data from Beijing showed a slowdown for May, but it was attributed to the effect of U.S. tariffs on normal trade flows, suggesting a deal between the two would see a return to that normal. Indeed, overall exports from China rose in May, by 4.8%, affected by a 34.5% slump in exports to the United States. That compared with an increase of 8.1% in April.

So, the tariff war is affecting China negatively, which was to be expected, but according to Moody’s, there are deeper problems in the Asian powerhouse’s economy, which is prompting a reorientation to the global scene. The goal: secure long-term growth. While doing that, Moody’s said, China would improve its economic diversification and its global investment footprint, and it would also boost the availability of foreign assets for local use.

Oil is clearly an area where this international expansion is evident and accelerating. Although China has been actively seeking to increase its domestic production of both crude and gas in order to reduce its dependence on imports, it still imports a solid chunk of its demand. So, to secure supply, China is actively expanding its participation in oil and gas projects abroad.

A report released earlier this year showed that in 2024, China’s foreign oil and gas investments hit an all-time high of $24.3 billion, mostly focused in the Middle East. Total Chinese investments in the region hit $39 billion last year, Chinese think tank Green Finance & Development Center, which produced the report, said.

Meanwhile, the country has become the top trading partner of African countries, where it has been expanding its energy investments steadily, just like its mining industry presence. In the period between 2010 and 2024, China invested some $66 billion in energy and construction projects on the continent, data reported by an UK think tank earlier this year showed. These investments accounted for a fifth of China’s total spend on energy and construction globally in the period. And there was a very good reason for this.

“A clear motivation for [Chinese firms], apart from new consumer markets and income streams, has been supply chain diversification, which has emerged as a strategy to mitigate risks from trade barriers that have intensified since 2018,” the analyst team at Moody’s said in its report. In other words, China has for years been doing what the EU and the U.S. are just now realizing they need to do: build secure, diversified supply chains.

It would take China’s competitors years to do what it did with supply chains and foreign investment. Indeed, what some from the political sphere have called “reshoring” might be a better idea. So, while China is expanding internationally because it needs fresh economic “blood”, so to speak, the West is learning to appreciate its own resources, which it can develop with a view to achieving its own strategic goals.