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138 Executive Summary This essay examines the forces that are pushing Chinese firms to expand their overseas operations, the obstacles to their success, and the implications for policymakers in China and abroad. Main Argument: Fierce economic competition and declining domestic revenues, combined with government encouragement and financial support, are pushing Chinese firms to globalize in order to establish local sales and distribution networks in host countries, support exports and open up new markets, secure access to raw materials and natural resources, and acquire technology, cutting-edge manufacturing know-how, and global brands. As late entrants to transnational commerce, however, Chinese firms are disadvantaged in a number of ways, including lacking experience in managing mergers and developing local and brand recognition. Policy Implications: • China’s emergence as a capital exporter, accomplished largely through the recycling of its huge domestic savings and foreign currency reserves, should benefit the global economy and improve China’s global standing. In addition, the relocation of China’s light manufacturing to other emerging economies should enhance China’s image in the developing world. • If Chinese firms prove capable of successfully managing and turning around new acquisitions , China will likely be able to make the leap from a manufacturing center to a global corporate powerhouse. • The aggressive efforts of Chinese firms to secure new resource suppliers are renovating the moribund commodity and industrial sectors in various countries, supplementing Beijing’s diplomatic efforts to increase international support for China, and may even reduce the willingness of U.S. allies to support Washington in disputes with Beijing. • As Chinese companies increasingly compete in developed markets, greater competition will force these companies to conform to higher standards of corporate governance, accountability , transparency, and social responsibility. 139 The Globalization of Corporate China Friedrich Wu Recent high-profile international acquisitions and takeover bids by Chinese companies have shifted media attention away from spotlighting China as the world’s major recipient of global inward foreign direct investment (FDI) to characterizing the country as a cash-rich “predator” on a global buying binge. Despite the latest public frenzy stirred up by accelerated cross-border merger-and-acquisition (M&A) forays by Chinese companies , a large number of these enterprises have already been discreetly internationalizing their operations for many years without attracting much media limelight.1 This paper therefore sets out to accomplish two tasks: (a) update the macro picture on China’s rising outward FDI with the latest available data, and (b) offer a more micro analysis based on a firm-level perspective.2 The main findings are as follows. China’s accession to the World Trade Organization (WTO) has enhanced the role of market forces in the domestic Chinese economy. As profit margins fall and competition increases at home, the economic pressures of trade liberalization combined with the entry of foreign firms into the domestic Chinese market are pushing Chinese firms 1 Friedrich Wu, “China’s Rising Speculative Capital Outflows,” Asian Wall Street Journal, March 7, 1994, 6; and Friedrich Wu, “Stepping Out the Door: Chinese Companies Are Becoming Major Investors Abroad,” China Business Review 20, no. 6 (November-December 1993): 14–19. 2 The most recently published delineation at the macro level is rather dated, as it was based on 2000–01 data. See John Wong and Sarah Chan, “China’s Outward Direct Investment: Expanding Worldwide,” China: An International Journal 1, no. 2 (September 2003): 273–301; and Mark Y.L. Wang, “The Motivations Behind China’s Government-Initiated Industrial Investment Abroad,” Pacific Affairs 75, no. 2 (Summer 2002): 187– 206. Friedrich Wu is Adjunct Associate Professor for the MSc. Program in International Political Economy at Singapore’s Nanyang Technological University, and a Visiting Senior Research Fellow at the East Asian Institute of the National University of Singapore. From 2001 to 2005 he was Director of the Economics Division at the Ministry of Trade and Industry, Republic of Singapore. He can be reached at . nbr analysis 140 to internationalize. Equipped with financial support and official government encouragement to go abroad, Chinese enterprises are simultaneously seeking out new markets and attempting to adapt to the pressure-cooker of the global economy. Though China’s emergence as a manufacturing center has shaken the international economy, the question of whether China can become a global corporate powerhouse remains unanswered. The challenges of developing local and brand recognition and turning around failing acquisitions continue to present barriers to even the most successful Chinese companies . How these firms adjust to and learn from the global marketplace will not only impact...

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Additional Information

ISBN
9781939131225
MARC Record
OCLC
868219407
Pages
230
Launched on MUSE
2014-01-01
Language
English
Open Access
No
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