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What is wrong with contemporary business history narratives explaining Chinese ODI? Lessons from China’s ‘Onward Journey’ FDI 1.

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Presentation on theme: "What is wrong with contemporary business history narratives explaining Chinese ODI? Lessons from China’s ‘Onward Journey’ FDI 1."— Presentation transcript:

1 What is wrong with contemporary business history narratives explaining Chinese ODI? Lessons from China’s ‘Onward Journey’ FDI 1

2 Background, literature review: Growing interest in Chinese ODI (because of growing volumes, high profile cases) in number of academic disciplines: – Case study work – Econometric studies, some surveys as well International business (IB) work finds that ‘strategic- asset-seeking’ is important Appealing, because it means we need new theories, so this is the dominant narrative today 2

3 But a problem with contemporary business history narratives: Don’t incorporate ‘onward journey’ ODI Most successful privately owned companies looking to invest overseas use an offshore holding company (BVI, Cayman Islands, Hong Kong) So excluded from econometric studies Case studies often focus on SOEs (or ignore implications of holding company structures) 3

4 Research Questions: R1: Is ‘onward journey’ ODI from private Chinese businesses significant, in terms of volume? R2: If so, what motivates it (market seeking, efficiency seeking etc.)? Destinations/size? R3: Does ‘strategic asset seeking’ explanation apply to these privately controlled Chinese TNCs? 4

5 Method Construct a sample of 150 publicly listed but privately controlled Chinese firms 85 from HK stock exchange, 65 from US exchanges (NASDAQ, NYSE) Using most recent annual reports, establish they are privately owned (weed out H shares etc.) Then establish which ones have overseas subsidiaries (non- investment holding), use notes to consolidated financial statements 5

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8 Results (R1) A surprise – 32 of 85 from HK have ‘onward journeyed’ – 25 of 65 in US sample Size: significant investments, totalling $500 million in 10 largest investments alone (R1) Sample include some well known companies (Li Ning, Shenzhou Int., Nine Dragons Paper, Texhong Textiles, Mindray Medical Int., Wuxi Pharmatech) 8

9 Results (R2) Market seeking very important, prior trade links, establish subsidiary for after sales service etc. – e.g. Kingdom Group in Italy, linen; Shenzhou Int. in Cambodia $30 m., counter trade restrictive measures; ND in Viet Nam); Mindray Medical International ($210 million takeover of Datascope) Efficiency seeking also important – Texhong Textile in Viet Nam (some of the largest manufacturing investments); Shenzhou (Cambodia); Nine Dragons 9

10 Results (R2) Unexpected result: TNC global production networks, facilitating internationalisation BYD Electronics (India/Hungary with Nokia); Minth Group (auto parts, Nissan, Fiat etc.); Wuxi Pharmatech (biotech) 10

11 Results (R3) Only limited evidence of strategic-asset- seeking Possibly Mindray and Wuxi Pharmatech Most look to R&D at home 11

12 Discussion/Conclusions Private sector ‘onward journey’ ODI totally missed to date Market seeking/efficiency seeking are important in these financially constrained firms So do we really need new theories about ‘strategic asset seeking’? Business history currently being written, but isn’t it missing these important companies? 12

13 Policy Don’t discourage offshore holding companies? Useful for raising capital, helping Chinese companies expand overseas? 13


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