The expansion of outward FDI: A comparative study of China and India

China: An International Journal

Volumn 9, Issue 1, 2011, Pages 1-25

  Zhao, Hong ^a  

^a NATIONAL UNIVERSITY OF SINGAPORE   (Singapore)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 80051629404     PISSN: 02197472     EISSN: None     Source Type: Journal    
DOI: 10.1142/S0219747211000021     Document Type: Article

References (40)

1. UNCTAD, World Investment Report, 2009.
2. UNCTAD, FDI database, 2008.
3. "Capital market imperfections" means that capital is available at below market rates for a considerable period of time, creating a semi-permanent disequilibrium in the capital market that (potential) outward investors can exploit.
4. Peter J. Buckley, L. Jeremy Clegg et al., "The Determinants of Chinese Outward Foreign Direct Investment", Journal of International Business Studies 38 (2007): 499-518.
5. B. Elango and Chinmay Pattnaik, "Building Capabilities for International Operations through Networks: A Study of Indian Firms", Journal of International Business Studies 38 (2007): 541-55.
6. UNCTAD, FDI database, 2008
7. ADB, Key Indicators for Asia and the Pacific, 2010.
8. As of October 2010, China held USD906.8 billion of US treasury securities, accounting for 21 per cent of the total (USD4,310.2 billion). See US Department of the Treasury/Federal Reserve Board, Major Foreign Holders of Treasury Securities, at [4 Jan. 2011]
9. Wenran Jiang, "China Tries to Wriggle Out of the US Dollar Trap", YaleGlobal, 29 Apr. 2009, at [17 July 2009].
10. "Indian Plans Sovereign Wealth Fund for Energy Assets Abroad", The Economic Times, 20 Feb. 2008.
11. Reserve Bank of India, Annual Report 2008-2009, at [27 Aug. 2009].
12. Oil dependence = net oil import ÷ total oil consumption.
13. International Energy Agency, World Energy Outlook 2009 (Paris: IEA, 2006).
14. Reserve Bank of India, Handbook of Statistics on Indian Economy, 2007/2008.
15. Brazil's Vale do Rio Doce, and Australia's Rio Tinto and BHP Billiton control more than 70 per cent of global iron ore resources.
16. Financial Times, 22 July 2009.
17. Yuefen Li and Bin Zhang, "Development Path of China and India and the Challenges for their Sustainable Growth", The World Economy 31, no. 10 (2008).
18. Jaya Prakash Pradhan, "India's Emerging Multinationals in Developed Region", MPRA Paper No. 12361, Dec. 2008, at [17 July 2009].
19. China's investments in Latin America are mainly concentrated in some tax havens like the Cayman Islands and Virgin Islands. By the end of 2008, these two areas together accounted for 16.5 per cent of China's stock OFDI, and 95.5 per cent in China's stock OFDI in Latin America.
20. Randall Morck and Bernard Yeung, "Perspectives on China's Outward Foreign Direct Investment", Journal of International Business Studies 39 (2008): 337-50.
21. China National Bureau of Statistics, China Statistical Yearbook, 2009, p. 752.
22. According to the "theory of localised technological changes", transnational corporations from developing countries typically share small-scale, standardised and labour-intensive technologies. These technologies are more suitable to domestic markets and markets with similar levels of national income and economic development
23. Sanjaya Lall et al., The New Multinationals: The Spread of Third World Enterprises (Chichester: J. Wiley, 1983).
24. Jaya Prakash Pradhan, "Growth of Indian Multinationals in the World Economy", Institute for Studies in Industrial Development, MPRA Paper No. 12360, Dec. 2008, at [17 July 2009].
25. Jaya Prakash Pradhan, "Outward Foreign Direct Investment from India: Recent Trends and Patterns", Gujarat Institute of Development Research, MPRA Paper No. 12358, 2008, at [17 July 2009].
26. The "theory of industrial upgrading and technological innovation" holds that the development of technology capabilities of developing countries is an ongoing incremental process which eventually leads to their industrial structural upgrading and some absolute advantages in certain technology areas. It is these absolute advantages that determine and promote their outward FDI. Thus, the evolution law of OFDI from developing countries is: neighbouring countries, followed by other developing countries, then developed countries.
27. John A. Cantwell and Paz Estrelia Tolentino, Technological Accumulation and Third World Multinationals (Reading: University of Reading, 1990).
28. The Sinopec-Addax transaction, if finalised, will greatly help Sinopec reduce its dependence on buying crude oil for its vast network of refineries and gasoline stations. More importantly, it will increase Sinopec's presence in one of the world's hottest oil-exploration frontiers - offshore West Africa, and oil-rich but politically sensitive Iraqi Kurdistan, The Wall Street Journal, 25 June 2009
29. Financial Times, 20 June 2009.
30. But this appears to be gradually declining and is likely to be an overestimate because private-sector OFDI is less likely to go through official procedures.
31. As shown by Figure 1, Indian FDI outflows rose to a historic level of USD21.4 billion in 2007 and fell by 12.1 per cent in 2008 (by end March) to USD18.8 billion, contrasting with China's doubling of its OFDI from USD26.5 billion in 2007 to USD52.2 billion in 2008. The contracting in Indian OFDI continued in 2009, falling by 14 per cent to USD4.7 billion in the first quarter of the same year.
32. Fortune China at [8 July 2009].
33. Concerns about sovereign wealth funds (SWF) have included the following ideas: the government may mismanage the funds, including paying insufficient attention to corrupt practices; the government may manage the funds efficiently but for non-profit purposes; SWF decisions may lead to "financial turmoil" (as it was alleged of hedge funds). See Edwin Truman, "A Blueprint for Sovereign Wealth Fund Best Practices", Peterson Institute Policy Brief, PB08-3, April 2008.
34. David Barboza, "China's Sprint for the Gold", at [19 July 2010].
35. while nearly 90 per cent of Chevron's workers are Angolan, including specialised personnel such as engineers and managers, Chinese oil companies employ fewer than 15 per cent Angolan labour. See "China in Africa: Soft Power, Hard Results", YaleGlobal Online Magazine, 13 Nov. 2009, at [19 July 2010].
36. The Chinese government has been taking some positive steps to address this problem. For instance, China's state-backed Africa investment fund is seeking to break new ground by pushing Chinese companies to build infrastructure through joint ventures with African governments, as the proliferation of China-Africa business ties and the binding of the fortunes of its companies more closely with local communities would help China counter criticism that it is exploiting Africa.
37. In reality, state-owned firms in China are increasingly subject to the disciplines of the market at home. They have preferred access to domestic credit through the state-owned banking system but on terms that are increasingly commercially-base 39 In Australia, there are two big concerns about the prospect of a significant rise in FDI from China into its resources sectors: is the surge of FDI into its mining and energy consistent with achieving the traditional gains from foreign investment? Are there any particular problems associated with investment from Chinese state-owned enterprises or state-managed sovereign wealth funds? Much of these concerns seem to relate to uncertainty about how to respond to the growth of Chinese investment in its resources and energy sector. Actually, the issues of state ownership, and other political or security matters are issues that cannot be appropriately dealt with by simply restricting Chinese or other countries' FDI proposals.
38. According to Chinese statistics data, in 2008, China's FDI in India was only USD102 million (accumulated value USD222 million), accounting for only a very small part of China's total OFDI which reached USD559 million (accumulated value USD183,970 million).
39. Joseph S. Nye, Jr., Soft Power: The Means to Success in World Politics (New York: Public Affairs, 2004), p. 89.
40. Jacques E.C. Hymans, "India's Soft Power and Vulnerability", India Review 8, no. 3 (July-Sept. 2009).