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01.12.2008 | Research Article

Historic and Emergent Trends in Chinese Outward Direct Investment

verfasst von: Professor Peter J. Buckley, Senior Lecturer Adam R. Cross, Reader Hui Tan, Liu Xin, Research fellow Hinrich Voss

Erschienen in: Management International Review | Ausgabe 6/2008

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Abstract and Key Results

Recent expansion of Chinese outward direct investment is analysed at two levels: at the aggregate level using Chinese Ministry of Commerce data and at the level of the individual FDI project using data compiled by the State Administration of Foreign Exchange.
Project level analysis reveals wholly-owned projects are increasingly displacing joint ventures as the predominant mode of entry.
Changes to the investment motivations are discernable in market-seeking FDI: with defensive and offensive FDI increasingly supplanting trade-related investment activity, and in strategic asset-seeking FDI: with improved access to foreign-owned technologies, brands, and distribution channels gaining importance.

Vorheriger Artikel Enhancing the Trustworthiness of Qualitative Research in International Business

Nächster Artikel Performance of Multinational Firms’ Subsidiaries: Influences of Cumulative Experience

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We acknowledge, of course, inherent difficulties with generalising about a disparate collection of nations like the developing countries.

Formerly, the Ministry of Foreign Trade and Economic Cooperation (MOFTEC) and the Ministry of Foreign Economic Relations and Trade (MOFERT). For simplification, we refer only to MOFCOM in this paper. Also, SAFE has previously been the State Administration for Exchange Control (SAEC) and the State General Administration for Exchange Control (SGEC).

Throughout this paper, the term outward direct investment (ODI) encompasses Chinese investment in minority-owned as well as majority and wholly-owned overseas affiliates.

On the other hand, upgrading developing country firms may also be able to leapfrog obsolescent technology and to adopt state-of-the-art production and product technology because of low sunk investment costs (Vernon-Wortzel/Wortzel 1988).

Although the precise mechanisms for the promotion of Chinese ODI activity remain sketchy.

For example, the investment value ceiling has been raised to US$30mn from US$1mn for natural resources-oriented FDI and from US$1mn to US$3mn for non-resource and non-financial FDI for projects under the control of provincial authorities (Sauvant 2005).

We owe these insights to a referee who we would like to thank for useful comments.

In Box One, we outline a number of shortcomings inherent with data from MOFCOM and SAFE. In particular, the data are for approved outward FDI only (typically undertaken by SOEs and large private or quasi-private Chinese firms). This excludes direct investments made by those (typically private, small and medium sized) Chinese firms using ‘informal’ (and often illegal) routes to international expansion beyond the government approval process. In practice, MOFCOM and SAFE data probably undervalue China’s outward FDI position, but to an indeterminate extent.

In order to better approximate the universe, future econometric work on Chinese ODI should ideally strive to incorporate estimates of ‘round-tripped’ FDI, although lack of suitable data inevitably makes this a difficult task.

Afghanistan (76 km of border with China), Bhutan (470 km) Burma (2,185 km), Hong Kong (30 km), India (3,380 km), Kazakhstan (1,533 km), North Korea (1,416 km), Kyrgyzstan (858 km), Laos (423 km), Macau (0.34 km), Mongolia (4,673 km), Nepal (1,236 km), Pakistan (523 km), Russia (northeast) (3,605 km), Russia (northwest) (40 km), Tajikistan (414 km), Vietnam (1,281 km). Source: The CIA World Fact Book.

This is a contentious point, of course. The population of both the USA and Canada comprise a significant proportion of ethnically-Chinese people as does Australia, but to a lesser extent. It is likely that the presence of a large Chinese diaspora facilitates the internationalisation of Chinese firms, but in ways not well captured by models of inter-country psychic distance.

It is an open question whether or not the Uppsala model is relevant to the internationalisation of smaller SOEs and private firms in China which invest outside of the formal approval process (and whose activities are thus not captured by the data reported here).

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Titel: Historic and Emergent Trends in Chinese Outward Direct Investment
verfasst von: Professor Peter J. Buckley
Senior Lecturer Adam R. Cross
Reader Hui Tan
Liu Xin
Research fellow Hinrich Voss
Publikationsdatum: 01.12.2008
Verlag: SP Gabler Verlag
Erschienen in: Management International Review / Ausgabe 6/2008
Print ISSN: 0938-8249
Elektronische ISSN: 1861-8901
DOI: https://doi.org/10.1007/s11575-008-0104-y

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