Chinese Companies Going Abroad

(I)

Prof.Taotao Chen
SEM, Tsinghua University
201608
Part I:
Position of Chinese Companies
investing abroad; Motivations,
capabilities & business environments
 Agenda
• Question raised

• FDI global trend and the position of Chinese

companies investing abroad

• Motivations of Chinese companies, Business

Environments & Capabilities of Chinese
companies

• Discussions
FDI global trend and the position of
Chinese companies investing abroad

Tsinghua SEM Prof.Taotao CHEN 4

 Global FDI Trend
World FDI Outflows
Millions of Dollars
2,500,000

2,000,000

1,500,000

1,000,000

500,000

-
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

Source: UNCTAD
5
 World FDI outflows
FDI Outflows
Millions of Dollars
2,500,000

2,000,000

1,500,000

1,000,000

500,000

Developing economies Developed economies Transition economies

Source: UNCTAD
6
 World FDI outflows
FDI Outflows
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
Developing economies Developed economies Transition economies

Source: UNCTAD
7
 World FDI outflows
FDI Outflows (intercontinental distribution)
Millions of Dollars
2,500,000

2,000,000

1,500,000

1,000,000

500,000

-
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
-500,000

Europe North America Latin America Asia Africa Oceania

Source: UNCTAD Database

8
 World FDI outflows
FDI Outflows (intercontinental distribution)
100%

80%

60%

40%

20%

0%
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

-20%
Europe North America Latin America Asia Africa Oceania

Source: UNCTAD
9
 China FDI Outward overall condition
( From 1985 to 2014)
Millions of Dollars

140000

120000

100000

80000

60000

40000

20000

0
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Source: UNCTAD 10
11
 FDI Global Trend vs. FDI from
China (FDI-outflow)
China's OFDI v.s. World
Millions of Dollars
2,500,000 9%
8.57%
8%
2,000,000 7.16%7%
6.52%
6%
1,500,000
4.83% 5%
4.69%
4.36%
4%
1,000,000
2.80% 3%

500,000 1.96%
1.81% 2%
1.48%
1.36%
1.01% 1.17% 1%
0.70% 0.91%
0.46% 0.47%
0.45% 0.46% 0.55% 0.54%
0.54% 0.38% 0.48% 0.60%
0.49%
0.34%
0.33% 0.16%
0 0.07% 0%
1991

2000
2001

2010
2011
1985
1986
1987
1988
1989
1990

1992
1993
1994
1995
1996
1997
1998
1999

2002
2003
2004
2005
2006
2007
2008
2009

2012
2013
2014
World China Percentage
Source: UNCTAD 12
 FDI Developing Economies Trend vs.
FDI from China (FDI-outflow)
Millions of Dollars China's OFDI v.s. Developing Economies
500,000 30%
450,000
25%
24.78%
400,000
22.24%
350,000 20.43% 19.95% 20%
300,000 17.70% 17.67%
16.55% 16.52%16.35%
250,000 15%
200,000
11.10%
10.29% 10%
150,000 9.03% 8.72%
8.69%
7.50% 8.10%
7.26% 7.33%
7.08%
100,000 5.37% 5.64%
5.51%
4.84% 5%
3.97% 4.20%
3.59% 3.49%
50,000 3.30%
2.50%
0 0.62% 0%
1987

1991

2012
1985
1986

1988
1989
1990

1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011

2013
2014
Developing economies China Percentage
13
Source: UNCTAD
 FDI Asia Trend vs. FDI from
China (FDI-outflow)
China's OFDI v.s. Asia
Millions of Dollars
600,000 25%

21.64%
500,000 20.56%21.12%
20%
19.38%
19.06%
17.89%
400,000
15.05% 15%
300,000
11.49%
9.59% 9.52% 10%
200,000 8.49% 8.21%
6.61% 7.04%
4.65% 4.60%
4.52% 5%
100,000 3.73%
3.43%
2.91% 3.22% 2.62%
2.50%
2.43% 2.27% 2.67%
1.83% 1.34%
1.29%
0 0.71% 0%
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
1985
1986
1987

Asia China Percentage

Source: UNCTAD 14
 US as host country to China
Millions of Dollars

YEAR 1985 1990 1995 2000 2005 2006 2007 2008 2009 2010 2011 2012
Netherlands -1871 25543 25973 75327 5018 20772 -1948 29934

France 10053 29078 5808 12950 25369 8865 3156 21664

United Kingdom 5198 4519 16255 82652 36132 38547 25434 52609 18373 23931 46799 20547

Japan 3368 18754 8118 7820 14200 16466 21134 22321 6544 15805 18984 19169

Canada 774 1821 4824 27258 14868 14770 43867 16794 30366 5522 18661 16460

Belgium .. .. .. .. -1561 541 12835 -989 13262 7405 10297 11876

Cayman Islands .. .. .. .. .. .. 8302 3674 2481 6819 12229 7689

Luxembourg .. .. .. .. 4235 17923 16051 6802 17349 28396 21548 6216

Korea 1039 3283 4751 1440 236 2245 3530 5240

Hungary 1975 4499 8689 2400 266 -26488 -3984 3640

China 1 37.. .. 146 315 8 500 500 1169 576 1370

15
Source: OECD Database
 US as host country to China
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Netherlands 4337 6365 8191 -1871 25543 25973 75327 5018 20772 8457 37174 8322 38927

Japan 6500 8544 17489 14200 16466 21134 22321 6544 15805 17077 22436 43619 33765

United Kingdom 21267 -4385 28137 36132 38547 25434 52609 18373 30069 46316 25310 35895 -102440

Switzerland 9751 -3127 12571 6551 1177 -4279 45660 10710 41406 19894 15603 18164 23541

Canada 4611 7090 33164 14868 14770 43867 16794 30366 7357 18790 16398 24153 21116

Germany 1990 12280 7079 12101 39540 -12690 17122 12320 18760 16396 6709 16348 19124

Luxembourg -1108 14344 7301 4235 17923 16051 6802 17349 29461 11989 7788 31250 16130

France 4624 4526 10706 10053 29078 5808 12950 25369 8865 795 25510 -3765 12882

China -120 -62 150 146 315 8 500 500 1037 1105 3415 2821 968

Source: BEA Database

 France as host country to China
Millions of Dollars
YEAR 1985 1990 1995 2000 2005 2006 2007 2008 2009 2010 2011 2012
Belgium .. .. .. .. 6969 6253 14375 5197 4739 1860 6919 14724

Canada 348 -26.36 -3840 2026 1807 558.9 -1646 6114

Germany 233 1214 2660 3272 7125 -237 12546 12579 -1914 3045 1617 3730
Switzerland 197 422 1360 479 2660 2381 4557 7421 1543 -162 5319 3355
Japan 68 1082 608 24 644 1087 301 1478 660 167 674 2555

Netherlands 197 1072 4630 13397 10061 16993 11099 5026 4136 7424 24630 2031

Russian
Federation 42.26 80.33 213.6 86.26 104.2 279.5 440.1 1234
HongKong 829 214.6 247.8 475.1 521 102 525.1 691.5
Cyprus 47.23 146.9 178 109.6 159.8 259.6 235.4 377.9
Luxembourg 9783 8135 15184 25287 -3544 7605 1380 338
China 14 1 0 3 2 0 528 -124 99 33 113 12.85

Source: OECD Database 17

 Germany as host country to China
Millions of Dollars
YEAR 1985 1990 1995 2000 2005 2006 2007 2008 2009 2010 2011 2012
United States 42 114 2651 3539 1684 2283 5867 1886 1046 4268 1928 6091.3

France -18954 6554.5 8141 -8997 1429.6 4755 -4655 5503.9

Jersey -1641 380.32 614.65 8.772 -237.6 270.2 197.77 3960.2

Netherlands 10913 4681.8 24825 -12111 3927.5 9757.6 4757.7 3881.7

Ireland 7857.3 5644.5 836.41 -1537 1218.4 3733.8 -4265 2744.2

Spain 382.8 203.34 3886.4 -3259 1868.6 -1764 1857.9 2415.2

Switzerland 104 -789 1256 3681 5987 758 2956 -1398 5240 829 8259 1600.3

Italy 25483 1884 16600 1317.3 2035.3 -1269 -302.2 1429.3

Austria -43 81 618 2264 1305 2178 3781 4034 713 699 5712 1226.2

Japan 201 662 703 804 -285 1362 2103 1681 538 637 1893 863.75

China 0 -6 -3 72 209 414 37 -75 156 465 476.32 237.79

Source: OECD Database 18

 UK as host country to China
Millions of Dollars
YEAR 1985 1990 1995 2000 2005 2006 2007 2008 2009 2010 2011 2012
United States 2170 9048 14667 19287 28338 22659 54431 33208 23663 35964 19867 19204

Belgium 41.811 1233 10.006 -1002 572.28 225.52 14506 15257

Netherlands 1071 3703 -999 7007 91558 25239 3192 32353 -15557 -7357 22192 3377.2

Germany 91558 25239 3191.9 32353 -15557 -6512 21029 3294.8

Japan 159 3714 -598 8727 -10135 6857 11613 1458 -4288 -114 921 2757.5

France 17530 4335.7 -4116 -4911 29552 -6986 568.91 2201.3

Luxembourg 274.5 406.7 6696 1779.9 9951.7 -5391 -7409 1266.2

Italy -76.35 518.96 566.34 -516.4 -1021 225.52 637.82 1248.8

Canada 2966.7 6457.5 1695 .. -1973 5684.3 .. 1033.3

HongKong 572.62 169.3 .. 1349.6 -237 4626.2 3211.5 931.85

China .. -12 .. 2 23.632 22.083 32.019 -36.62 191.8 13.902 .. 305.86

Source: OECD Database 19

 Source countries of FDI to Africa in 2014
Source countries of FDI to Africa
Asia (exclude China and Other developing
India) countries
India 9% 0%
1%

China
7%

Africa
12% EU
53%

Other developed
countries
9%

USA
9%

Note: FDI value of greenfield projects.

20
Source: World Investment Report 2015.
 Brazil as host country
Bahamas Korea Mexico 2013 Brazil inflow
Portugal 1% 1% 1%
1%
Others
New Zealand 12%
2% Italy Netherlands
2% 21%
Germany
2% UK
Canada 2% United States
2% 18%
France Spain
3% 5%
Switzerland Chile
5% Japan 6%
Luxembourg
5% 10%

Source: Banco Central do Brasil 21

 Composition of China Outward FDI in
2005/2013
In 2005 In 2013
North Oceania North Oceania
America 1% America 3%
2% 5%
HK
24% Africa Latin
3% America
13%

Asia
Latin except Europe
America HK 6%
45% 8% HK
Asia 58%
except
Europe HK
17% 12%

Africa
3%
SEM Tsinghua University 22
Source: 2005, 2013 Statistical Bulletin of China’s Outward Foreign Direct Investment
 China’s OFDI Stock by Sector
——at the end of 2014
Production and Information Scientific Research,
Supply of Electricity, Transmission, Technical Service and
Geologic Prospecting Agriculture, Forestry,
Real Estate Gas and Water Computer Services
1% Animal Husbandry
3% 2% and Software and Fishery
Construction 1% Others 1%
Transport, Storage 3%
1%
and Post
4%

Manufacturing Leasing and Business

6% Services
36%

Wholesale and Retail

Trades Financial
12% Intermediation
Mining 16%
14%

Source: 2014 Statistical Bulletin of China’s Outward Foreign Direct Investment

 CHINA: NUMBER OF DOMESTIC INVESTING
ENTITIES BY INDUSTRY, END-2014 (Percentages)
Information Management of Water
Scientific Research, Transmission, Computer Conservancy,
Technical Service and Services and Software Environment
Hotels and Catering Geologic Prospecting 2% PublicFacilities
2% Transport, Storage and
Services 1% Production and Supply of
Post
2% 2% Electricity, Gas and
Mining Real Estate Water
Construction 3% 2% 1%
Agriculture, Forestry, Culture, Sports and
Animal Husbandry and 3% Entertainment
Fishery 1%
3%
Others
3%
Leasing and Business
Services Wholesale and Retail
6% Manufacturing Trades
28% 41%

Source: 2014 Statistical Bulletin of China’s Outward Foreign Direct Investment

 CHINA: STOCK OF OUTWARD FOREIGN DIRECT
INVESTMENT BY TYPE OF INVESTING ENTERPRISE, END-
2014 (Percentages)

Private enterprises
46% State-owned
enterprises
54%

Source: 2014 Statistical Bulletin of China’s Outward Foreign Direct Investment

 CHINA: NUMBER OF DOMESTIC INVESTING ENTITIES,
BY TYPE OF INVESTING ENTERPRISE, END-2014
(Percentages)
State-owned
enterprises
7%

Private
enterprises
93%

Source: 2014 Statistical Bulletin of China’s Outward Foreign Direct Investment

Motivations, business environments
and Capabilities of Chinese
Companies

Tsinghua SEM Prof.Taotao CHEN 27

• What are the motivations of Chinese
companies going abroad?
 General Motivations
• All kinds of motivations have been included
for Chinese companies investing abroad;

• But motivations are different for different

region and different industries, mainly
because of the different location advantages
of different regions for specific industries.

Tsinghua SEM Prof.Taotao CHEN 29

Motivations, Business Environments &
Capabilities
• For example

– US & Europe
– Australia & Canada

– Africa
– Latin America
– Asia

Tsinghua SEM Prof.Taotao CHEN 30

Motivations , Business Environments &
Capabilities
• Take Europe and US as examples

– What are the location advantages in

Europe?
– What are the motivations of Chinese
companies investing in Europe?
– What are the reflections of European world
toward Chinese investments?
– What are the capabilities of Chinese
companies? (Huawei? Goldwind? Gili?)
Tsinghua SEM Prof.Taotao CHEN 31
Motivations , Business Environments &
Capabilities
• Take Europe and US as examples

– What are the location advantages in US?

– What are the motivations of Chinese
companies investing in US?
– What are the reflections of US toward
Chinese investments?
– What are the capabilities of Chinese
companies? (Lenovo? Haier? Huawei?)
Tsinghua SEM Prof.Taotao CHEN 32
Motivations , Business Environments &
Capabilities
For example Australia and Canada
– Motivations?
– Location advantages?
– Reflections?
– Capabilities?
Eg. Yan mining in Australia
Eg. Minmetal in Australia

Tsinghua SEM Prof.Taotao CHEN 33

Motivations , Business Environments &
Capabilities
• For example Africa
– Motivations?
– Location advantages?
– Reflections?
– Capabilities?

Resource seeking, such as China Nonferrous

Metal Mining Group(CNMC) in Zambia;

Tsinghua SEM Prof.Taotao CHEN 34

Motivations , Business Environments &
Capabilities
• For example Latin America
– Motivations?
– Location advantages?
– Reflections?
– Capabilities?

Eg. State Grid in Brazil,

Eg. MinMetal Chile & Peru;
Eg. Minth in Mexico
Eg. Foton in Columbia
Tsinghua SEM Prof.Taotao CHEN 35
Motivations , Business Environments &
Capabilities
• For example Asian countries
– Motivations?
– Location advantages?
– Reflections?
– Capabilities?

Eg. TCL in Vienna

Eg. Shanghai Electricity Group in Japan;

Tsinghua SEM Prof.Taotao CHEN 36

Discussions & Questions

(listen to the audience)

Thanks for your cooperation!