Outward Investment by Chinese MNCs

Outward Investment by Chinese MNCs - Outward investment by...

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8 Business Horizons 47/3 May-June 2004 (8-16) S ince 1978, when it opened its doors to the world, China has achieved spectacular success in attract- ing foreign direct investment. In 2002, it sur- passed the US as the largest recipient of FDI in the world. However, investment has not been flowing in just one direction. According to the World Bank (1997), in the mid-1990s China was the largest outward investor among developing countries and the eighth largest supplier of outward investment among all countries. As Table 1 shows, MNCs from China cumulatively invested more than $36 billion worldwide between 1982 and 2001. Despite the growing importance of FDI outflows from Chinese MNCs, little or no research has been done on this significant issue from a business perspective. Most researchers are interested primarily in public policy issues. This article attempts to fill this gap by focusing on a cru- cial business issue: What factors motivate Chinese MNCs to engage in so much FDI? To find the answers, we con- ducted a study of aggregate data, both macro and micro, from the FDI/TNC database of the United Nations Con- ference on Trade and Development (UNCTAD) that de- scribe the overall patterns and destinations of China’s outward FDI. Company-level data and cases were also studied, derived from Almanac of China’s Foreign Economic Relations and Trade by the Ministry of Foreign Trade and Economic Relations (MOFTEC). Along with numerous company profiles and websites, they provide investment projects as examples for illustration and allow an exami- nation of the actual investment activities made by Chi- nese multinationals. Trends and patterns C hina’s drive to invest abroad gained particular momentum after 1992, with annual FDI outflows soaring to $3.07 billion on average (see Table 1). Chinese MNCs have been expanding abroad rapidly. In 2001, as Table 2 shows, the top 12 controlled over $30 billion in foreign assets, with more than 20,000 foreign Over the past two decades, Chinese multinationals have made a huge amount of foreign direct investment abroad, making China one of the world’s leading foreign investors. The phenomenon has not been widely studied from a business perspective, however. Given the increasing prominence of Chinese MNCs in global business, this study of both macro and micro data sets out to fill the gap by concentrating on the motives underlying Chinese MNCs to invest abroad, and by examining their unique features, which differ particularly from other MNCs in emerging countries. A detailed analysis and a number of cases round out the discussion. Ping Deng Associate Professor of Business Administration, Maryville University, St. Louis, Missouri ([email protected]) Outward investment by Chinese MNCs: Motivations and implications Focus on China
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9 Business Horizons 47/3 May-June 2004 (8-16) P. Deng / Outward investment by Chinese MNCs: Motivations and implications Table 1 FDI outflows from top emerging countries, 1982–2001 (Ranked by total outflows, in $million) Total Average Average Rank Countries 1982–1991 1992–2001 (1982–2001) (1982–1991) (1992–2001) 2001 1 Korea $6,448 $34,171 $40,619 $645 $3,417 $2,600 2
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