Outward FDI: Theories, Practice And China's Strategy Choices

The economic globalization is the main trend of the world economy development at present. Since the 1980's ,the progress of the economic globalization has speeded up obviously . The increase of the international transactions between goods and services,the increase of the scale and the forms of the international capital flow and the wide-ranging spread of technology has heightened the degree of the economic linkage and the dependence among nations of the world increasingly .The main driving force of the economic globalization originates from the FDI of the transnational corporations. The developed countries have been acting as the main force of the global FDI and occupying a very important place in the amount of the global FDI for quite a long time ,relying on such advantages as powerful economic strength , rich technological forces and abundant experience of management and administration and so on .China's economy is a significant component part of the entire world economy . If China participates in the international economy cooperation and competition only by foreign trade and attracting FDI, China will have to accept passively the global strategy arrangement of the developed countries and their transnational corporations and can not occupy the beneficial position in the accelerating process of the economic globalization. Moreover, a great amount of foreign transnational corporations entered into the Chinese market and have brought tremendous pressure to the Chinese domestic enterprises. If the Chinese enterprises do not go outside to develop FDI in order to raise their own competitiveness by taking part in the international competition,they will not be able to obtain numerous benefits brought by the economic globalization , whereasmay lose their domestic market.Hence , there will be significant strategy sense for raising China's position in the world economy and trade if the Chinese enterprises go outside to develop FDI vigorously and to take part in the international competition and cooperation in an all-round way while they are developing foreign trade and attracting FDI energetically.Since the reform and opening-up in late 1970's,China has achieved great success in utilizing FDI and China's actual utilization of FDI has occupied first place among the developing economies and second place among all nations in the world only next to the United States since 1993 (particular years excepted). Although China's Outward FDI has also developed rapidly and its scale enlarged continuously,its development is obviously sluggish comparing with that of utilizing FDI. There is a big difference between the development of China's Outward FDI and the development of its inward FDI .According to the statistics datum from UNCTAD World Investment Report 2005, up to the end of 2004 ,the stock of China's inward FDI is USD 245.467 billion, whereas the stock of China's Outward FDI is only USD 38.825 billion. The stock of China's Outward FDI merely occupys 0.4% of the Outward stock of the global FDI and 3.7% of that of the developing economies. The ratio of the stock of China's Outward FDI and inward FDI is only 0.16:1 , not only lower than the level of 1.33:1 of the developed countries, but also lower than the level of 0.47:1 of the developing economies.China Outward FDI is at the primary stage. The present situation of China's Outward FDI does not match the speed of the economic development of China and the position of China's economy in the world economic structure. It is unfavourable for the Chinese enterprises to utilize two kinds of resources and two markets at home and abroad and to raise the efficiency and the ability to distribute the resources.From the experience of Outward FDI of the Asian"Four Little Dragons"and so on newly industrialized economies, we can see the development of Outward FDI is not only advantageous to gaining the lacking natural resources and obtaining the advanced technology and the experience of management and administration , but also plays an important role in exploring the export market to enlarge the exports, promoting the domestic industrial structure optimized and upgraded, reducing production costs and improving the international competitiveness.Therefore, Strengthening the study of the theories and practice of FDI abroad, absorbing and using foreign research achievements and the success experience for reference,deeply probing into the theoretical foundation of China's Outward FDI and formulating the realistic developing strategy according to the present status of China's Outward FDI are of great theoretical and practical significance to promoting the steady and healthy development of China's Outward FDI.This thesis may be divided into three mains parts consisting of nine chapters. The structure of this thesis is as follows:Introduction elaborates on the research background and the sense of the selection of this title ,reviews the literature concerned at home and abroad,gives a brief description of the relative concepts, introduces the methodology adopted,the structure arranged, the basic conclusions and the fields need to be studied further.Part One consists of Chapterâ… to Chapterâ…¢.This part summarizes systematically and evaluates objectively the influentialtheories of FDI from the western countries and the developing economies. Firstly, it chiefly reviews H.Hymer and C.P.Kindleberger's Theory of Monopolistic Advantages, P.J.Buckley and M.C.Casson's Theory of Internalization, R.Vernon's Theory of Product Life Cycle, J.H.Dunning's Eclectic Theory of International Production andR.Veugelers'Theory of Strategic FDI among the micro theories of FDI. Secondly, it reviews G.D.A.Macdongall and M.C.Kemp's International Investment Benefit Distribution Model, K.Kojima's Theory of the Marginal Industry Expansion, R.Z.Aliber's Theory of Capitalization Rate, J.H.Dunning's Theory of Investment Development Cycle and M.E.Porter's Theory of Competitive Advantage among the macro theories of FDI. Thirdly, it reviews L.T.Wells'Theory of Small-scale Technology, S.Lall's Theory of Localised Technological Change, J.Cantwell and P.E.E.Tolentino's Theory of Technological Innovation and Industry Upgraded and the Theory of Motivation Factors Combination by some western scholars among the theories of FDI from the developing economies. It also sets forth the guiding sense and positive role of the western FDI theories in the practice of FDI from the developing economies.Part Two consists of Chapterâ…£to Chapterâ…¥.This part analyses empirically the practice and the experience of FDI from the world, the main developed countries and the developing economies by utilizing detailed and dependable statistics datum. It summarizes the features of FDI from the world and the developing economies by examining and analysing systematically the history, present status and the trend of FDI from the world and the developing economies. It sums up the experience by examining vertically and comparing horizontally the practice of FDI from some typical developed countries such as the United States and Japan and some developing economics such as the Asian"Four Little Dragons". The aim of examining systematically the practice of FDI from foreign countries in this part is to provide useful experience and enlightenment for the development of China's Outward FDI.Part Three consists of Chapterâ…¦to Chapterâ…¨.Based on making use of the research achievements and the successful experience of FDI from foreign countries, this part probes into the theory, the practice and the development strategy of China's Outward FDI . Itprovides the theoretical basis for the development of China's Outward FDI by analysing the applicability of the western FDI theories to China's Outward FDI and by exploring the motivation and comparative advantages of China's Outward FDI. This part also examines the development course and summarizes the features of China's Outward FDI. Then, it probes into the impact of FDI on the economy and the existing problems of China's Outward FDI. Furthermore, based on the successful experience of foreign countries and China's actual situation, it puts forward many strategies and counter measures for the Chinese enterprises and the government to develop Outward FDI. The research in this part may provide the decision reference for the Chinese government to formulate the realistic strategy to guide scientifically the Chinese enterprises to develop Outward FDI.