Li Dongkun
Home Institution: Southwestern University of Finance and Economics
Visiting Period:September 2013 to September 2014
Research Project: The Influences of Chinese OFDI on Home and Host Countries
Dongkun is a Ph.D candidate in the School of International Business at the Southwestern University of Finance and Economics, Chengdu, Sichuan, China. Dongkun will be a Doctoral Fellow based at the China Research Centre from September 2013 to 2014.
The Influences of Chinese OFDI on home and host countries
The past two decades have witnessed the striking transformation of the Chinese economy aimed at integration with the global economy. Accompanying this process has been an unprecedented expansion in inward foreign direct investment into China by Multinational Enterprises. At the same time, there is an obvious surge of Chinese outward FDI from 2002, and in 2010, China has become a top five source country of FDI.
China's OFDI did not enjoy much attention at first. A substantial body of literature has instead focused on the prominence of China as a recipient of foreign direct investment (FDI) and its consequences for national economic development (Branstetter/Lardy, 2006). By now, researchers from home and abroad have studied Chinese OFDI thoroughly and have some meaningful conclusions. These include the following aspects: the determination of Chinese firms making their decisions (Lall and Albaladejo, 2004; Buckley et al., 2007); Location selection (Deng, 2007; Deng, 2009) and enterprise internal management (Zhou and Luo, 2007; Chen&Tan, 2010).
A large number of experts take Chinese OFDI as the mirror-image of inward FDI received by destination countries. Increasingly a growing body of literature has begun to try to explain Chinese OFDI in more detail. A detailed understanding of this process, however, remains incomplete, mainly due to the paucity of sufficiently disaggregated data (Buckley et al, 2007). This research focuses on the following questions concerning Chinese OFDI:
1. Why do Chinese firms choose to “go global”?
International investment theory came to fuition from the 1960s and 1970s, including the monopoly advantage theory (Hymer, 1960), the product cycle theory (Vernon, 1966), the internalization theory (Buckley, 1976), the international production compromise theory (Dunning, 1977) and the marginal industry transfer theory(Kiyoshi,1978). However, the majority view is that mainstream theory does work and that special theories nested within the general theory are also needed (Buckley et al. 2007, Lall 1983, Wells 1983, Khan 1986, Lecraw 1993, Zin 1999, UNCTAD 2006).
China has a relatively large home market, cheap labor and land, the advantage of familiar domestic regulations, culture and preferences. Why then would a later-comer like China, with few competitive advantages abroad, choose to invest in a foreign country at such high levels over such a short time? What are the reasons that outweigh domestic advantages and pushes Chinese firms to “go global”? The representative view that the national government plays a critical role (Aggarwal/Agmon 1990; UNCTAD 1996, 2006; Sauvant, 2005) gives some indication but cannot fully explain how this happened and how government policy can induce so many firms to continuously go abroad. What are the mechanisms and short-term and long-term effects of this policy?
2. What are the effects of Chinese OFDI on home and host countries?
There is substantial research in China focusing on how Chinese OFDI affects the Chinese economy. These works care about the influence of Chinese OFDI on the development of Chinese total factor productivity (TFP)(Zhao & He, 2002; Wang, 2004; Zou, 2008; Huo, 2011); about reverse knowledge spillover (Zhao et al, 2006; Ma & Zhang, 2003); and about domestic industrial upgrading (Zhao, 2010; Zheng, 2012). However, very few works have paid much attention to the influence of this OFDI on host countries. The reason may be the fact that data from host countries is not easy to obtain.
My research project concerns both problems above. Only if Chinese OFDI can bring benefits to both the home and host countries can it be sustainable in the future.