Statistics from the Ministry of Commerce show, in 2013, domestic investors made direct investment in 5,090 enterprises in 156 countries and regions. Non-financial outward direct investment totaled $90.17 billion, an increase of 16.8 percent, a record high since China nudged their way into the top three countries investing most in overseas markets in 2012.

China's factor-driven and investment-driven development pattern is facing profound changes. The country now needs to advance in the global industrial division by boosting outward investment. At the same time, as improvements have been made in economic structure, asset size, and domestic savings, China is well prepared to invest overseas on a large scale.

In the early years of opening up and reforms, attracting foreign capital could help China make up for shortages in deposits and foreign exchange, while restraining outward investment would relieve the plight. Yet, the "twin shortages" were reversed in the mid- and late 1990s, and "twin surpluses" have been seen. Therefore, the mechanism, which was geared to absorb foreign capital and restrain outflow of domestic capital, lost its reason for existence.

In addition, according to the theory of investment development path, net outward investment, or outward direct investment minus inward investment, reflects the development status of a country. When a country's per-capita GDP reaches $2,000-$4,750, outward investment will become an inevitable choice. According to statistics from the International Monetary Fund, China's per-capita GDP surpassed $6,100 in 2013, indicating that an era of large-scale capital export has come into sight.

However, China is still at the lower end of outward investment, for most capital is used in purchasing energy and resources. As an open economy, China is highly dependent on imports of energy and resources, and should have a louder voice in deciding their prices on the international stage. In fact, the production and supply of strategic energy and resources are mostly manipulated by a few multinationals. Beyond that, the seller always has a larger influence in the market. Given these two factors, China has a distinct lack of leverage when it comes to defining pricing and import volume.

What's more urgent is promoting industrial innovation and economic restructuring. Since hi-tech products are always short-lived and require a lot of research input, investors have to rely on massive exports to earn profits that match their investments.

In determining its outward investment strategy, China should lay an emphasis on integrating global resources, especially the superior resources of developed countries, such as research and development ability, technology stock and human capital. In this way, the country will see an elevation in corporate competitiveness and innovation capacity.

Meanwhile, China should strike a balance between making investments overseas and attracting foreign capital, in an effort to propel its ascent up the global value chain and its overall economic upgrading.

This is an edited excerpt of an article by Zhang Monan, an associate research fellow at the State Information Center, originally published in Economic Information Daily