Research On Foreign Direct Investment Of Chinese State-owned Enterprises

Foreign investment was originated from western countries more than a centuryago. It has become a major sustainable motivation of the growth of world economy.As the deep development of the globalization, more and more countries re-allocateresources through foreign direct investment and adjust the structure of internationaldivision of labor. China, the largest developing country in the world, has beengrowing rapidly in the past years. Its demands for developing direct foreigninvestments grow significantly as the national power grows. State-owned firms aremain force of direct foreign investment of China. On the contrary to the decreasingglobal foreign investment, China increased its foreign direct investment multipletimes. Chinese state-owned firms seized the great opportunities, increased scale offoreign investments and improved their investment structures.This dissertation is targeted at the direct foreign investment of Chinesestate-owned firms. It bases its analysis on the related theories, starts from the overallsituation of past and current foreign investments then analyzes key attributes ofChinese FDI, international environment, investment motivation, core competence,risk management and lessons from other countries’ experiences. The goal is toprovide suggestions to Chinese state-owned firms on efficient and effective foreigndirect investments.FDI from Chinese state-owned firms has some special attributes that aredifferent from the developed countries’. Firstly, the speed and investment scaleincreased dramatically during the past decade. Secondly, the developing model ofChinese state-owned FDI focus majorly on overseas’ resources. State-owned resource companies are the main entities and they realized the investments throughmerger and acquisitions. Thirdly, the competence of Chinese state-owned increasedovertime. It gradually becomes international leader in terms of market, technologyand resource. Chinese state-owned firms provide important security of nationalpolitical and economic security, also the national defense and social security.After the financial crisis of2007, many countries have adjusted their economicpolicy to improve their domestic economy and innovations. Countries such as U.S.and Japan have developed new strategic plans to keep and form new competitiveadvantages in technology and industrial developments. Other emerging countries arealso trying to catch the great opportunities to adjust their economic policies. Chinesestate-owned firms proposed new strategies to actively react on other countries’ newpolicies.Chinese state-owned firms have the ability to support fast paced FDI demandsas the deep development of globalization. Also the objective demands ofdevelopment of Chinese economy and internationalization needs of the corporationssupports FDI strongly. Secondly, the appreciation of RMB and high balance offoreign reserve provide liquidity for the state-owned firms to invest overseas. Theincreasing influence of Chinese enterprises and rising international position of Chinahave also improved the rapid development of Chinese FDI.Chinese state-owned firms have improved international competence throughrenovations. Comparing to fortune500multi-national firms, Chinese state-ownedfirms’ FDI has more advantage in gross revenue and profitability, but weaker interms of international marketing and management, brand construction and coretechnology. The past three decades showed that Chinese state-owned firms areenergetic and have great potential. To further deep the renovations in state-ownedfirms, China should diminish the regulation limitations and form modern corporateinstitutions. That will enhance the leading role of Chinese state-owned firms in FDIand improve international competence of Chinese state-owned firms. Because of the hardships in international political and economical environment,Chinese state-owned firms face more and more risks from global economicdepression, protective international trade policies, business securities overseas andincreasing difficulties of international merger and acquisitions. Also, internal riskssuch as decision making, management and financial analysis make the FDI facingmore uncertainty. That needs the Chinese government and state-owned firms to unifyand utilize multiple methods to avoid and decrease the risks, to further create a goodenvironment for international management.Developed countries such as the U.S. and Japan and emerging countries such asSouth Korea and the BRICS, all have their own models and experiences in foreigndirect investments. This dissertation analyzes experience of four of those countriesand provides suggestions to Chinese state-owned firms’ FDI.At the end of this dissertation, the author proposes several strategies to furtherdevelop Chinese state-owned firms’ FDI. On the one side, given the complicatedinternational investment environment, Chinese government should support thestate-owned firms to ‘go abroad’ and provide supporting system, such as taxation,industrial policy, international trade policy, foreign exchange financing and projectauthorization etc. The government should also provide informational services to helpthe corporations to improve international competence and development. On the otherhand, the state-owned firms should broaden ideas and channels, work withinternational industrial organizations to ‘go abroad’, to develop overseas economicspecial zones, to realize mergers and acquisitions through private equity funds, toincrease risk control, overall to improve the FDI of Chinese state-owned firms.