Historic and Emergent Trends in Chinese Outward Direct Investment

Zusammenfassung

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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.

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Auszug

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Historic and Emergent Trends in Chinese Outward Direct Investment

Introduction

A substantial body of literature has grown on the prominence of China as a recipient of foreign direct investment (FDI) and its consequences for national economic development and management practice (Branstetter/Lardy 2006). By contrast, much less attention has been paid to China's position as an FDI source. Given that China attracted an annual average FDI inflow of around US$29bn (or more than 7 percent of the world's total) in the 1990s, but contributed less than US$2.5bn (around 0.6 percent) to global outflows, this is perhaps not surprising (UNCTAD 2006). However, the sharp growth in Chinese outward direct investment (ODI) evident since 2002 (illustrated in Figure 1), combined with a number of recent high profile attempts by Chinese enterprises to acquire North American and European firms, have brought into relief China's rising status and potential as an investor nation. This potential is recognised in a recent UNCTAD survey of investment promotion agencies which predicts that China will become a 'top three' source country for FDI before the end of 2008 (UNCTAD 2005). It is also highlighted by the Director-General of UNIDO, Kandeh Yumkella, who suggests that annual flows of Chinese outbound investment are likely to reach US$60bn by 2010 (MOFCOM 2006). If growth rates in Chinese ODI continue and these predictions are realised, China's contribution to global FDI flows is likely to approximate current outflows of the leading industrialised countries.

In this exploratory study, we identify historic and emergent trends detectable in official aggregate data and individual FDI project level data on Chinese ODI for the period 1991 to 2005 with regard to investment destination, activity type, entry mode choice and investment motivation. Our aim is to assess whether or not Chinese ODI conforms to the general model of ODI and to the special case of emerging country ODI in general, and Asian countries in particular, with respect to the character and evolution of its recent ODI. To do this, we review in the next section some selected contributions to the literature on developing country ODI in order to establish a 'received wisdom' or base model against which we can contrast our empirical data from China. We also include some evidence from other Asian countries to control for cultural and regional interactions.1 We go on to consider how the evolving institutional framework within which Chinese ODI is conducted and, especially, how adjustments to the administrative system and the engagement and disengagement of government at various times, notably following the launch of China's zou chu qu or 'go global' policy in 1999, have influenced the internationalisation decisions and motivations of Chinese firms. After providing further evidence for the rise of China as an FDI source country, we examine trends in respect of (i) aggregate Chinese ODI stocks and flows; (ii) the spatial distribution of Chinese ODI; (iii) the sectoral distribution, and (iv) the dominant entry mode employed. This is done by reviewing data on accumulated Chinese ODI by host economy as published by the Chinese Ministry of Commerce (MOFCOM) and by analysing previously unpublished data from China's State Administration of Foreign Exchange (SAFE), a government agency that administers, via the banking system, foreign exchange-related matters.2 In the second part of the paper, we relate detected trends to emergent motivations advanced in the literature as driving the outward FDI activities of Chinese firms. We propose that Chinese ODI is indeed distinctive with respect to a standard model of developing country ODI, which itself is distinct...

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