Preliminary Report on China’s going Global Strategy: A Labour, Environment, and Hong Kong Perspective

Capital Mobility Research Paper Series No 3

By Au Loong Yu and Kevin Li (Globalization Monitor)

Globalization Monitor, Hong KongSince the turn of the century Chinahas already become a significant player of out-flowing FDI (Foreign Direct Investment), FPI (Foreign Portfolio Investment) and an international world lender. This is against the background of China’s proclamation of seeking a ‘peaceful rise’. It is followed by more than 20 years of huge FDI inflow, which for many years was second only to the USA and then for three consecutive years, beginning from 2002, surpassed it.

For some years the think tanks of the Chinese government saw the relationship between Yinjinlai, literally meaning ‘inviting in’ (inflow FDI),and Zouchuqu, or ‘going global’ (outflow FDI), as supplementary to the course of modernization. According to this discourse, in the first phase of modernization, a country tends to accept more inflow FDI, without, the surplus capital for export. Then the inflow FDI, after interacting with the domestic market, necessarily modernizes the country to a point where it is both possible and necessary for the country to build its own TNCs (Transnational Corporations) and conduct overseas investment.

In 2004 the head of the Research Centre for the study of TNCs, Wang Zhile, edited a report on China’s TNCs with funding from the state. The Research Centre is a branch of the Research Institute of the Ministry of Commerce. Wang noted that

“Both the ‘inviting in’ and ‘going global’ strategies are ways to integrate into economic globalization. ‘Inviting in’ is the base for ‘going global’, and ‘going global’ is the necessary result of ‘inviting in’. The former strategy enables our country to get necessary economic resources like capital, technology and raw materials, but the initiative does not lie in the hands of our corporations. In fact, China’s accession to the WTO (World Trade Organisation) not only implies that she has domestic obligations to fulfil, but also that she is entitled to her legitimate rights beyond China. Only when we enhance our strategy of ‘going global’, of trans-national operation, can we balance our obligation with our rights’

Another professor from the think tank further elaborates the relations between ‘going global’ and the WTO:

“Now that China has become a WTO member state, we on the one hand need to fulfil our domestic obligations, while on the other we can also enjoy the privilege of national treatment (under WTO terms) afforded to Chinese enterprises, when they enter the markets of WTO member states.”

Chinabegan her overseas investment in 1980 following the course of market reforms that were kick started in 1979. Generally we can divide the last 28 years into three periods.

The preparatory phase: 1979-1991

Although the amount of over seas investment in this period is small, it helped Chinese firms to accumulate the necessary experiences and to cultivate partnerships and contacts for more overseas investment in the following years. In this period the place for overseas investment was first and foremost Hong Kong.

The second phase: 1992-1998

Deng Xiaoping’s tour to the South marked his attack on the ‘Conservative’ and the inauguration of full scale integration to global capitalism. It also began a period when China’s overseas investment increased dramatically. Again HK remained the most important destination, although it also started to diversify.

The third period: 1999- present

In early 1999 the State Department adopted a new document to promote overseas investment with special emphasis on processing industry. In 2001 Premier Zhu, in his policy address to the People’s Congress, officially used the term “going global” strategy for Chinese firms. In this period there is not only a dramatic increase of out flowing FDI, but also FPI(Foreign Portfolio Investment), including financial investment and international lending. 

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