Presentation on theme: "Historical Reasons for China’s Government FDI Role"— Presentation transcript:
1 Historical Reasons for China’s Government FDI Role Oded ShenkarFisher College of BusinessThe Ohio State University
2 GDP per Capita: China and Western Europe 1-1998 A.D. $ 2002160008000400020001000575Western EuropeWestern EuropeChinaYearSOURCES: Maddison Angus (2001). The World Economy: A Millennial Perspective. Organization for Economic Cooperationand Development. p.42; author’s calculations.
3 Source: Compiled from Maddison, A 2003, The World Economy-Historical Statistics
6 Lessons in Foreign Engagement Learning from one’s own experienceThe opium war and humiliation by the West: Use foreign technology to catch up but do not allow foreigners to establish a permanent foothold; if necessary, protect and promote domestic players at the expense of foreigners; monitor and control foreign investment; experiment on a small scale and move incrementally.
7 Not to worry much about getting things European to the Chinese, but rather about getting remarkable Chinese inventions to us; otherwise little profit will be derived from the China missionLeibniz’s advice to a Jesuit travelling to China Mokyr,1990/Berg, 2002
8 Learning from othersJapan, South Korea, Taiwan, Singapore can teach China useful lessons, for example, that it is vital to gain technology transfer, first via entry more restrictions then via other means; that it is important to grow local champions and it is OK to do it at the expense of foreign competitors and that it is OK to achieve it via a combination of incentives to domestic players and disincentives to foreign players.
10 FDI Motivation of Chinese Firms (I) Financial MotivationCheap Capital (especially for SOEs)To mitigate Yuan exchange pressureTo take advantage of lower foreign asset pricing (Result of Yuan revaluation and the financial crisis)Relaxation of foreign exchange control for overseas asset acquisition 4/06 and later measures
11 FDI Motivation of Chinese Firms (II) Strategic and Managerial MotivationsDevelop global championsFend off foreign and local competition at homeAccess technologyGet close to marketShorten way to global brandsPreempt trade limitationsDevelop managerial capabilities in global business, marketing, logistics
12 FDI Motivation of Chinese Firms (III) Political MotivationsTo enhance China’s global profileTo safeguard energy and raw materialTo counter currency manipulation chargesTo overcome protectionist sentimentTo build domestic constituencies in the US and EUTo build geopolitical standing