The Study On Foreign Direct Investment Of Chinese Private Enterprises

Due to the global layout and resources allocation of Multinational Corporations, the pace of globalization has been accelerated after the Second World War. Especially from the latter half of1990s, the growth of foreign direct investment continues to accelerate and the scales have been expanded under the in-depth development of globalization, which gets to the climax in2007.Since the reform and opening up, foreign direct investment in China has experienced the development of30years, and the total investment scale increased sharply while its mode tends to diversify. As a result, foreign direct investment of China widen its influence in the world. However, China’s economy is facing many problems, such as the growing lack of resources, the extensive mode of development, weak innovation capability and lack of motivation, comparing with that China is the second largest economy in the world. As a big developing country, China must take advantage of the opportunities provided by globalization, increase the intensity of opening up, speed up the pace of foreign direct investment, make full use of the fruits of development which is brought by the international labor division, make good use of the new achievements of the world’s scientific&technological development and advanced management experience and the innovation competence of developed countries, exploit the international market and international resources, which promote the adjustment of China’s economic structure and the transformation of development mode, sustain the stable and healthy development of China’s economy.Chinese state-owned enterprises dominate in China’s foreign direct investment. However, due to the institution deficiency of Chinese state-owned enterprises and the institution conflicts of foreign direct investment, there are staggering losses and huge risk in foreign direct investment. Meanwhile, private enterprises can achieve the goal of foreign direct investment effectively thanks to the constraints of natural property rights and incentives of interests. As the first region of China’s private economy, there is relatively high degree of market development in Wenzhou and there is the stronger impulse for foreign direct investment in private enterprises, which was called Wenzhou Model of going global by Ministry of Commerce People’s Republic of China. In March2012, the State Council approved the establishment of a comprehensive financial reform area in Wenzhou, and personal RMB foreign direct investment pilot studies were conducted in the pilot program. It shows that the important first-try task of Chinese private enterprises and foreign direct investment can be undertaken by private enterprises of Wenzhou. Therefore, it is of the typical significance and important value to study foreign direct investment of private enterprises in Wenzhou.The dissertation employs global production network for the mainline of the study and takes foreign direct investment as the object of study. Firstly, the study focuses on the course of development and spatial pattern of foreign direct investment activities in different countries including China from the macro level. Secondly, the study analyzes the dynamic mechanism, location choice and mode selection of foreign direct investment in private enterprises, respectively. Finally, the countermeasures of improving foreign direct investment in private enterprises are put forward accordingly. The following issues are been studied in great details:(i) The study reviews the evolution of the historical development of foreign direct investment activities in the world and China, summarizes the characteristics of the various stages of development, and analyzes comparatively the advantages and disadvantages of foreign direct investment between China’s state-owned enterprises and private enterprises;(ii) Dynamic mechanism of foreign direct investment of private enterprises has been studied by the theoretical analysis and empirical test;(iii) The location choice of foreign direct investment of private enterprises has been also studied by the theoretical analysis and empirical test;(iv) The general pattern of foreign direct investment in private enterprises has been summarized, which made verification to the typical case of two private enterprises in Wenzhou;(v) Learning from Porter diamond model of competitive advantage, countermeasures were analyzed further from the perspective of corporate strategy, relevant and support the characteristics of the industry and the government.According to the theoretical and empirical analysis mentioned above, it can come to the conclusion as following:(Ⅰ) Comparing with multinational enterprises in the developed countries, multinational enterprises in developing countries do not have the competitive advantage. In the context of the global production network, foreign direct investment of the enterprises in developing countries is for more likely the advantage-seeking investment.(Ⅱ) China’s foreign direct investment is characterized by resources and manufacturing investment oriented, meanwhile have a common feature of the current era of globalization investment diversification. Due to the institutional weaknesses of the state-owned enterprises, private enterprise system had its natural advantages, private enterprises should speed up foreign direct investment and making it the emerging strength of China’s foreign direct investment. Wenzhou Model was regard as a going out of foreign direct investment of private enterprises in Wenzhou, so to the study of it is of practical significance and theoretical value.(Ⅲ) The dynamic mechanism of the foreign direct investment in private enterprises can be divided into three categories, such as the policy-using,the advantages-expanding and the advantage-seeking. In the context of the global production network, advantage-seeking is becoming a new impetus.(Ⅳ) With the in-depth development of economic globalization, foreign direct investment location choice. The factors of location choice of foreign direct investment are becoming increasingly integrated. Advantages-seeking is a new important factor of foreign direct investment position for the location choice of private enterprises. There is no coupling between the distribution network power and network organization of space for Wenzhou private enterprises in foreign direct investment.(Ⅴ)The type of improving innovation capability, the type of improving market control ability,the type of double improving between innovation capacity and market control,and the type of improving manufacturing capacity are the general pattern of foreign direct investment in private enterprises in the future. If private enterprises want foreign direct investment to be successful, they must have the appropriate internal and external conditions.(Ⅵ) To accelerate foreign direct investment of private enterprise is a transnational integration model that consistent with China’s strategy of opening up. According to Porter diamond model of competitive advantage in-depth analysis, we can come to the conclusion that:(i)The strategy, structure and competition status of private enterprises need to be improved,(ii) Industry associations, intermediaries and other related support industries are key competitive advantages,(iii) Improving laws and regulations indirectly for government is an important practices guide as a good catalyst role.