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Investing Overseas Without Moving Factories Abroad: The Case of Chinese Outward Direct Investment

Investing Overseas Without Moving Factories Abroad: The Case of Chinese Outward Direct Investment Chinese outward direct investment (ODI) is unique in the sense that it starts in the early stage of economic development and does not move factories overseas. Empirical analyses using firm-level data confirm that the main purpose of Chinese ODI is to strengthen domestic production and productivity by acquiring strategic assets overseas. This Chinese style of ODI, which is different from Japanese efficiency-seeking ODI or American market-seeking ODI, is mainly underscored by significant cost advantage and abundant foreign exchange. We suggest that there might be a life cycle of ODI, which evolves from the Chinese style to the Japanese style and then to the American style as the economy develops. Following this proposition, we expect a major wave of ODI by Chinese small-sized and medium-sized manufacturing enterprises in the coming decade. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Asian Development Review MIT Press

Investing Overseas Without Moving Factories Abroad: The Case of Chinese Outward Direct Investment

Huang, Yiping; Wang, Bijun
Asian Development Review , Volume 30 (1) – Mar 1, 2013
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Publisher
MIT Press
Copyright
© 2013 Asian Development Bank and Asian Development Bank Institute
ISSN
0116-1105
DOI
10.1162/ADEV_a_00004
Publisher site
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Abstract

Chinese outward direct investment (ODI) is unique in the sense that it starts in the early stage of economic development and does not move factories overseas. Empirical analyses using firm-level data confirm that the main purpose of Chinese ODI is to strengthen domestic production and productivity by acquiring strategic assets overseas. This Chinese style of ODI, which is different from Japanese efficiency-seeking ODI or American market-seeking ODI, is mainly underscored by significant cost advantage and abundant foreign exchange. We suggest that there might be a life cycle of ODI, which evolves from the Chinese style to the Japanese style and then to the American style as the economy develops. Following this proposition, we expect a major wave of ODI by Chinese small-sized and medium-sized manufacturing enterprises in the coming decade.

Journal

Asian Development Review – MIT Press

Published: Mar 1, 2013

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