What is wrong with contemporary business history narratives explaining Chinese ODI?

1. What is wrong with contemporary business history narratives explaining Chinese ODI? Lessons from China’s ‘Onward Journey’ FDI

2. Background, literature review: • Growing interest in Chinese ODI (because of growing volumes, high profile cases) in number of academic disciplines: • Case study work • Econometric studies, some surveys as well • International business (IB) work finds that ‘strategic-asset-seeking’ is important • Appealing, because it means we need new theories, so this is the dominant narrative today

3. But a problem with contemporary business history narratives: • Don’t incorporate ‘onward journey’ ODI • Most successful privately owned companies looking to invest overseas use an offshore holding company (BVI, Cayman Islands, Hong Kong) • So excluded from econometric studies • Case studies often focus on SOEs (or ignore implications of holding company structures)

4. Research Questions: • R1: Is ‘onward journey’ ODI from private Chinese businesses significant, in terms of volume? • R2: If so, what motivates it (market seeking, efficiency seeking etc.)? Destinations/size? • R3: Does ‘strategic asset seeking’ explanation apply to these privately controlled Chinese TNCs?

5. Method • Construct a sample of 150 publicly listed but privately controlled Chinese firms • 85 from HK stock exchange, 65 from US exchanges (NASDAQ, NYSE) • Using most recent annual reports, establish they are privately owned (weed out H shares etc.) • Then establish which ones have overseas subsidiaries (non-investment holding), use notes to consolidated financial statements

8. Results (R1) • A surprise • 32 of 85 from HK have ‘onward journeyed’ • 25 of 65 in US sample • Size: significant investments, totalling $500 million in 10 largest investments alone (R1) • Sample include some well known companies (Li Ning, Shenzhou Int., Nine Dragons Paper, Texhong Textiles, Mindray Medical Int., Wuxi Pharmatech)

9. Results (R2) • Market seeking very important, prior trade links, establish subsidiary for after sales service etc. • e.g. Kingdom Group in Italy, linen; Shenzhou Int. in Cambodia $30 m., counter trade restrictive measures; ND in Viet Nam); Mindray Medical International ($210 million takeover of Datascope) • Efficiency seeking also important • Texhong Textile in Viet Nam (some of the largest manufacturing investments); Shenzhou (Cambodia); Nine Dragons

10. Results (R2) • Unexpected result: TNC global production networks, facilitating internationalisation • BYD Electronics (India/Hungary with Nokia); Minth Group (auto parts, Nissan, Fiat etc.); Wuxi Pharmatech (biotech)

11. Results (R3) • Only limited evidence of strategic-asset-seeking • Possibly Mindray and Wuxi Pharmatech • Most look to R&D at home

12. Discussion/Conclusions • Private sector ‘onward journey’ ODI totally missed to date • Market seeking/efficiency seeking are important in these financially constrained firms • So do we really need new theories about ‘strategic asset seeking’? • Business history currently being written, but isn’t it missing these important companies?

13. Policy • Don’t discourage offshore holding companies? • Useful for raising capital, helping Chinese companies expand overseas?