Global Players from Emerging Markets: Strengthening ... - Unctad

Figure 3. Top 20 Chinese Overseas Investors, by FDI stock, 2003
Foreign Owned Enterprises
5%
State Owned Enterprises
43%
Other
1%
Collectively Owned
Enterprises
2%
Source: China, Ministry of Commerce.
is at an early stage, and that too much should not be
made of short-term trends, these figures suggest that
securing raw materials and other resources is a very
major part of the FDI effort by its enterprises.
Types of enterprises. Between 1979 and 1985,
Chinese OFDI approvals were tightly controlled and
largely undertaken by state-owned enterprises (SOEs),
including provincial and municipal corporations.
Trade relations and expanding China’s influence were
the guiding principles behind this early investment.
After 1985, non-state-owned firms were allowed
to apply for approval to invest overseas, especially
for manufacturing and to access foreign markets.
Between 1992 and 1998 there was a rapid increase in
OFDI by SOEs, including provincial and municipal
corporations, both in and via Hong Kong (China). This
led to a tightening-up of approval procedures in order
to better manage the process. Since 1998, however,
the authorities have actively encouraged OFDI, both
to secure key resources (including raw materials and
technology) and establish “global” Chinese TNCs as
part of a strategy of creating national champions in
the face of formidable competition from existing non-
Chinese TNCs, within and without China. Though
this latest phase is relatively new – and all OFDI is
subject to government approval – some commentators
regard the post 1998 period as an “acceleration stage”
in Chinese OFDI. 27 The data suggest some merit to
this view (box 1). 28
27 John Child and Suzana B. Rodrigues 2005, “The
Internationalization of Chinese Firms: A Case for Theoretical
Extension?”, Management and Organization Review, Vol. 1, No
3; and Douglas H. Brooks and Hafiz Mirza (2005), “Outward FDI
from Developing Asia”, paper presented at the Asian Development
Bank seminar, “Outward Foreign Direct Investment from Asian
Developing Countries”, Bangkok, 28-29 November.
28 For further discussion, including various nuances of Government
policy towards OFDI, see John Wong and Sarah Chan (2003),
“China’s Outward Direct Investment: Expanding Worldwide”,
China: An International Journal, Vol 1, No 2; Dexin Yang
(2003), Foreign Direct Investment from Developing Countries: A
Hong Kong (China)
& Macau(China)
Private Companies
2%
10%
Holding Companies
4%
Limited Holding Companies
11%
Limited Companies
22%
CHAPTER V 51
Characteristics of China’s Transnational
Enterprises. Some 43 per cent of all Chinese outward
foreign investors in 2003 were state-owned enterprises
and, leaving aside “Hong Kong (China) and Macau
(China)” and “Foreign Owned Enterprises” 29 , the
remaining investors are a mixed bag of private,
limited, holding and collectively owned companies
(figure 3). Most are large companies, working closely
with the state and, therefore, likely to pursue OFDI in
accordance with at least some of the priorities of the
Government. As mentioned earlier, smaller, private
companies are unlikely to be captured by either
MOFCOM or SAFE data.
Looking at specific companies, tables 3 to 5
provide insight on the nature of the largest Chinese
TNCs. Although there is a slight variation in terms
of which TNCs appear in these tables (since these
relate to the ranking of companies in FDI stock,
revenues and assets overseas), the vast majority
are state-owned enterprises. In consequence, the
largest sectors or industries represented by these
large TNCs are resource/raw materials orientated
companies (e.g. China Petroleum & Natural Gas,
China Ocean Petroleum, China Resources and China
MinMetal Corporation; it is likely that some of the
holding companies are parents to similar companies),
transport and communication to handle imports and
exports (e.g. China Airline, China Shipping and China
Foreign Trade Shipping Corporation), Heavy Industry
(e.g. China Construction Engineering Corporation
and China Bao Steel) and the Information Technology
and Electrical/Electronic industry (e.g. China Mobile,
China Telecom and China Electric). It is only in this
last sector that a few private companies (e.g. Huawei
Case Study of China’s Outward Investment, Centre for Strategic
Economic Studies, University of Melbourne, unpublished thesis;
UNCTAD (2004), “China: An Emerging FDI Outward Investor”,
e-brief, United Nations, New York and Geneva.
29 Presumably establishing grandchildren subsidiaries in third
countries.