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52 Outward Foreign Direct Investment by Enterprises from China
Box 1. Chinese OFDI: Data limitation
There are two official sources of data on Chinese OFDI: the Ministry of Commerce (MOFCOM), which
approves OFDI by non-financial Chinese firms, and the State Administration of Foreign Exchange
(SAFE), which – in addition – includes data on non-Financial OFDI.
Furthermore, the data disseminated by MOFCOM is based on approvals, while the SAFE data relates
to capital movements, which might include movements of capital over and above the approved levels
(although, as is generally recognized, approved investments do not necessarily materialize or occur at a
later date). Neither MOFCOM nor SAFE collect data on reinvestments and various other components of
FDI flows; nor (in most cases) do they include information on OFDI by private, small and medium-sized
enterprises. As an example of the scale of the difference arising from using data from different sources,
the stock of Chinese OFDI in 2003 was $11.4 billion (table 2) according to MOFCOM, whereas the
SAFE-based figure is around $37 billion a (and OFDI through informal channels would boost the latter
figure even further).
Although the MOFCOM figure is probably a significant understatement of the scale of Chinese OFDI,
there are concerns that “round-tripping” inflates the SAFE data. b Given the fragility of the data, this
paper opts to use the more conservative MOFCOM approved dataset, which has the additional merit of
providing a useful breakdown of the information by destination countries/regions and industry. It should
be recognized, however, that the full scale of Chinese OFDI is likely to be somewhat larger.
Source: Authors.
a From table Annex B.4 in UNCTAD (2004), World Investment Report 2004: The Shift Towards Services, United
Nations, New York and Geneva.
b See Geng Xiao (2004), People’s Republic of China’s Round-Tripping FDI: Scale, Causes and Implications, ADB
Institute Discussion Paper No 7, Asian Development Bank, Manila.
Technology and China Great Wall Computer Corp.)
appear in table 4 – i.e. revenues overseas, which are
not necessarily achieved through FDI, although the
companies mentioned do have sizeable levels of FDI
abroad.
The continuing importance of the state-owned
sector in OFDI results from such firms receiving
privileged access to capital and technology. In
consequence, according to the Economist, China’s
“best” companies are state-owned TNCs: “…the most
impressive are the resources groups. For example,
three big oil companies, PetroChina, Sinopec and
CNOOC, are aggressively buying overseas and
building pipelines across central Asia to satisfy
China’s fuel demands. They are in more than a dozen
countries: CNOOC, for example, is Indonesia’s
largest offshore oil producer”. 30 In contrast, because
China opened its economy to foreign companies at
a relatively early stage in its development – relying
on them for export-orientated industrial development
– the competitive strength of major global TNCs has
dampened the emergence of home-grown private
30 The Economist (2005), “The Struggle of the Champions”,
March 10th .
sector TNCs. The few significant ones are mostly in
electronic/electrical industries (e.g. Haier, Huawei,
Lenovo, TCL, Gome and Bird), although there are
some private sector Chinese TNCs in cars, clothing
and food & beverages. 31
C. Drivers and motivations
Unlike other established developing countries,
China is a relatively new investor and very little
research has been conducted on the main motives
underlying Chinese OFDI. The discussion below,
therefore, mostly relies on a few existing surveys,
reports in business journals and a careful scrutiny of
the nuances of the OFDI in terms of factors such as
the main industries of investment and the nature of
the companies involved. A survey by Roland Berger
on FDI strategies by the “top 50 Chinese TNCs” 32
highlighted three broad categories of motives: seeking
31 Business Week (2004), “China’s Power Brands”, November
8th .
32 Eugene von Keller and Wei Zhou (2005), From Middle
Kingdom to Global Market, Roland Berger Strategy Consultants,
Shanghai.