Study On China's Outward Foreign Direct Investment In Agri-food Sector

In recent years,there has been an astounding growth in China's outward foreign direct investment(OFDI)in overseas agri-food sector.The stock of China's OFDI in agriculture,forestry,animal husbandry and fisheries in 2016 reached 14.885 billion U.S.$,about 29 times that of 2005(0.512 billion U.S.$).Therefore,an in-depth analysis of Chinese enterprises' investment behavior in overseas agri-food sector is needed to deepen people's understanding of the motivation,decision-making characteristics and behavior patterns of China's agri-food OFDI.This study firstly reviews the history of China's agri-food OFDI,and systematically analyzes the basic situation of China's agri-food OFDI from a multi-dimensional perspective.Based on the typical cases of enterprises with agri-food OFDI,this study also makes a comparative analysis of the different enterprises' behavioral characteristics.In empirical context,the process of an enterprise's agri-food OFDI behavior could be divided into three important investment related decisions about:the investment of enterprises abroad,the choice of the investment destination(or country),and the entry mode selection.This study conducts the empirical research on the above three important OFDI decisions from the perspective of the enterprises' competitive advantage and the characteristics of the host countries.The following firm-level data were used:(a)agri-food OFDI firm list sample(sample size:1686)screened from a dataset called "Cross-border Investment Firm List" released by China Ministry of Commerce;(b)agri-food manufacturing enterprise sample(sample size:28776)from the "Annual Industrial Survey" data collected by the China National Bureau of Statistics;(c)agri-food OFDI event sample that Chinese A-share companies participate in(sample size:162).The country-level data of host countries were solicited from FAO,world Bank,IMF and other international organizations.Based on the analysis,the following conclusions could be drawn:(1)The history of China's agri-food OFDI has witnessed the single-to-multiple development of investment actors,destination countries and entry modes.In the early stages the main investors were always state-owned agri-food enterprises,which are now growing into private and non-agricultural enterprises engaged in agri-food OFDI.Also,China's agri-food OFDI started in neighboring countries(or developing countries),and then extended to more developed countries.Now growing proportions of these enterprises prefer mergers and acquisitions(MA)rather than Greenfield investment(GF)when investing in overseas agri-food sector.(2)The typical case analysis shows that state-owned enterprises' agri-food OFDI behavior is in line with the strategic positioning of utilizing overseas agricultural resources and fostering multinational corporations with international influence in the strategy of agriculture "going global".Some powerful private enterprises also invest in overseas agri-food sector motivated by foreign agricultural resources or overseas markets.Some non-agriculture enterprises that aim at diversifying their business also invest in foreign agri-food sector through the purchase of foreign agricultural assets.(3)The proportions of agri-food enterprises participating in the international market through OFDI are still very low.Compared to other enterprises in the same industry,enterprises that participate in agri-food OFDI have monopoly competitive and internalization advantages.Innovation ability of enterprises,research and development(R&D),economies of scale,and management ability can effectively and steadily promote agri-food OFDI.In addition,this study also finds that the productivity of enterprises that invest in different countries varies:enterprises with higher productivity tend to invest in developing countries;while those with lower productivity may invest in developed countries.(4)China's agri-food OFDI is strongly motivated by productive resources(e.g.,agricultural land)and agriproduct resource seeking.Besides resource seeking motivation,Chinese enterprises also consider market size and potential as important factors when choosing target country to invest in its agri-food sector.The host country with fast growing population and insufficient food indicate that there is potential in developing agricultural and food markets for Chinese enterprises to invest in the future.(5)An enterprise's competitive advantages can affect whether it chooses MA or GF to enter the host country.Enterprises with stronger R&D capabilities,marketing capabilities or management capabilities are more inclined to choose MA mode.This result is in line with the theoretical analysis of resource-based theory.Similarly,enterprises with strong core technology are more likely to generate synergies through MA.Enterprises with high management ability will have stronger integration capabilities for MA,resulting in greater synergies.(6)The characteristics of the host countries will also affect the entry mode choice of enterprises'agri-food OFDI,the costs of entering the host countries,the internal management costs and the external market transaction costs after entering host countries.These characteristics include the degree or level of agricultural development of the host countries,development of financial markets,the culture and institutions differences between the host countries and China,and contributions of the institutional environment to the market economy.Finally,this study summarizes some policy suggestions for Chinese government and some suggestions for enterprises that have investment intetion in foreign agri-food sector as well.Besides,this study also puts forward the prospect of future research.