Oded Shenkar Fisher College of Business The Ohio State University GDP per Capita China and Western Europe 1 1998 AD 2002 16000 8000 4000 2000 1000 575 1 200 400 600 800 1000 1200 1400 1600 1800 2000 ID: 758228
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Slide1
Historical Reasons for China’s Government FDI Role
Oded ShenkarFisher College of BusinessThe Ohio State UniversitySlide2
GDP per
Capita:
China
and Western
Europe1-1998 A.D.
$ 2002
160008000400020001000575
1 200 400 600 800 1000 1200 1400 1600 1800 2000 Year
Western Europe
China
SOURCES: Maddison Angus (2001). The World Economy: A Millennial Perspective. Organization for Economic Cooperation and Development. p.42; author’s calculations.
Western EuropeSlide3
3
Source: Compiled from
Maddison
, A 2003, The World Economy-Historical StatisticsSlide4
Imperial Footprints
+ Imperial Size Ambitions
+
Bureaucrats Rule
+ Local Fiefdoms+ Ideology & Practicality+ Western Technology, without Western Values
©
Oded ShenkarSlide5
Bureaucrats Rule
1st on social ladder
Oversee the economy
Accountable to Emperor
©
Oded Shenkar
Modern
Translation: Market may seem free, but bureaucrats call the shotsSlide6
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.Slide7
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
mission
Leibniz’s
advice to a Jesuit travelling to China
Mokyr,1990/Berg, 2002Slide8
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 incenti
ves to domestic players and disincentives to foreign players.Slide9
Reaching Out
Learning to launch outward FDISlide10
FDI Motivation of Chinese Firms (I)
Financial Motivation Cheap
Capital
(especially for
SOEs)To
mitigate Yuan exchange pressure To 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 measuresSlide11
FDI Motivation of Chinese Firms (II)
Strategic and Managerial MotivationsDevelop global champions
Fend off
foreign and local competition
at homeAccess technologyGet close to marketShorten way to global brandsPreempt trade limitationsDevelop managerial capabilities in global business, marketing, logistics Slide12
FDI Motivation of Chinese Firms (III)
Political MotivationsTo enhance China’s global profileTo
safeguard
energy
and raw material
To counter currency manipulation chargesTo overcome protectionist sentimentTo build domestic constituencies in the US and EU To build geopolitical standing