The flow of China's outbound foreign direct investment is set to rise at a compound annual growth rate 20 per cent in the next five years as more enterprises become financially equipped to go global, a new report by China CITIC Bank International reveals.

The study titled "A New Era of Chinese Enterprises Large-scale 'Going Out': Opportunities and Challenges," shows that outbound direct investment by Chinese firms progressed in the last decade, as evidenced by the rise in OFDI flow and stock of 47.9 per cent and 35.2 per cent CAGR, respectively. The research noted that while the number of companies "going out" is still not commensurate with China's economic status in the world, the increase indicates expanding power.

"There still are major challenges to going outbound," says Dr Liao Qun, chief economist and general manager of the research department at China CITIC Bank.

"External challenges arise from increasing investment protectionism overseas and increasing risks in the global investment markets. Internal challenges emerge from the scarcity of international management experience, inadequate assessment of the global environment, a lack of international talent and so on," he added.

To close the gap, the study says Hong Kong plays a valuable part in creating a bridge between Chinese enterprises and the world.

"Chinese firms should further leverage off this bridging role for their large-scale 'going out.' Meanwhile, Hong Kong should enhance its role by steering clear of negative elements that are unfavourable to the city's economic development and becoming more open, free and more efficient," concluded Liao.

China CITIC Bank predicts that China OFDI flow will go beyond $200 billion by 2017.