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

62 Outward Foreign Direct Investment by Enterprises from China
Cambodia, there seems to be some definite evidence of
Chinese SME-TNC OFDI in sectors such as garments
and electrical/electronic goods, often underwritten by
close links between individuals in China and the host
country (usually people of Chinese ethnic origin).
At present, the scale of OFDI by Chinese
SMEs is an imponderable. Though there may be
large numbers of SME TNC investments overseas,
it is also quite possible that quite a few of these are
“mis-sightings” because of general unfamiliarity
with Chinese state and private TNCs; after all, they
have only recently emerged into the global limelight.
In other words, considerable research is required
to establish the scale and nature of Chinese SME
TNCs, including their characteristics and motives.
The Chinese Government certainly cannot ignore
this sector at home or abroad, and it is essential that
better data are collected by state authorities. As in all
countries, although “champions” play a vital function
– for example in securing “strategic” industries or
acting as role models – the mainstay of economic
vitality is underscored by SMEs, although this may
not yet fully be the case for China. Knowledge
about Chinese SME TNCs is also important for host
countries; for example, it is likely that – as for FDI
from other emerging economies, such as the Republic
of Korea, Taiwan Province of China and Thailand –
Chinese SME FDI is likely to be regionally focused,
as opposed to the global intentions of larger players.
E. OFDI policy measures and
support facilities
Since 1979, the Chinese Government has
enacted a series of policies and legislation on outward
foreign direct investment. The overall framework will
be discussed in terms of four aspects: basic principles,
rules and regulations, control measures and promotion
policies.
Basic principles
China’s direct investment in foreign countries
follows the principles of “equality and mutual
benefit, stress on efficiency, diversified forms and
mutual development”. “Equality and mutual benefit”
refers to the fact that all the operation activities of
China’s TNCs should comply with the laws of
the host country; both parties of the cooperation
have equal rights to negotiation, operation strategy
and management, and share the risks and benefits
according to the proportion of investment. “Stress on
efficiency” means that Chinese domestic enterprises
are required to consider the practical needs and
conditions choose their priority sectors to develop,
adopt proper investment scale and yield quick returns
from investment. “Diversified forms” refers to various
means of investment, investment proportion and
operation methods. “Mutual development” means
that through joint investment and operation, both
parties of the cooperation will make profits.
Rules and regulations
No specific laws on direct investment in foreign
countries have been promulgated by the Chinese
Government. Relative policies are included in the rules
and regulations issued by ministries or commissions of
the State Council. They include: Notice on Rights and
Principles of Examination and Approval of Non-trade
Joint Ventures Enterprises Abroad and in Hong Kong
and Macao Regions, issued by former Ministry of
Foreign Economic Relations and Trade in May 1984;
Examination and Approval Procedures and Control
Measures on Establishing Non-trade Joint Ventures
Enterprises Abroad, issued by former Ministry of
Foreign Economic Relations and Trade in July 1985;
Foreign Exchange Control Measures on Overseas
Investment, issued by State Administration of Foreign
Exchange in March 1989; Specific Rules of Foreign
Exchange Control Measures on Overseas Investment,
issued by State Administration of Foreign Exchange
in June 1990; Notice on Transmitting the Suggestion
of Encouraging Enterprises to Develop Overseas
Processing and Assembling Enacted by Ministry of
Foreign Trade and Economic Cooperation, National
Economic and Trade Commission and Ministry of
Finance, issued by General Office of the State Council
in February 1999; Notice on Application Procedures
and Relative Principles of Overseas Processing and
Assembling Projects, issued by former Ministry of
Foreign Trade and Economic Cooperation and former
National Economic and Trade Commission in May
1999; and Notice on Simplifying the Examination
and Approval Procedures of Overseas Processing
Trade and Transferring the Authority to Local
Departments, issued by Ministry of Commerce and
State Administration of Foreign Exchange in June
2003.
China has signed with many foreign countries
and regions bilateral trade and economic cooperation
agreements, investment protection agreements and
double taxation relief agreements. By the end of
2002, China has signed trade agreements or protocols
and economic cooperation agreements with 147
countries and regions, bilateral investment protection
agreements with 109 countries and regions, and
double taxation relief agreements with 81 countries
and regions. To some extent, they provide necessary
institutional guarantee for domestic enterprises to
invest overseas.