IIS| International Investment Studies
Working Paper No.201609
May 8, 2016
China: Economic Structure Change and Outward Direct Investment
Wang Yongzhong, Li Guoxue, Wang Bijun
Abstract
Based on a comprehensive investigation on the current circumstances, challenges and prospect of Chinese economy, Chapter 9 discusses over the necessities and approaches of China’s upgrade in global value chains and the industrial structure through outward direct investment. Due to the rising costs of production factors, rapid aged tendency of population, lack of advanced technology and gloomy global economy, China’s current growth mode featuring with overdependence on export and investment can’t be sustainable. As a large nation with huge oversea assets and an important player in the global international investment scene, China can make use of ODI activities to effectively upgrade its industrial structure and improve the status in the international specifications and global value chains, through acquiring advanced technology, well-known brands, marketing networks and resources, and transferring domestic overcapacity industries. The initiative of “One Belt One Road” will provide large potential for Chinese enterprises to go globally. However, as a late comer in international investment field, Chinese enterprises have faced more obstacles and risks than those of their western counterparts, such as investment barriers and resistance, national security fears, investment risks, insufficient international business experience, and political intention suspicions. To enhance China’s capacity to create and capture value-added in the global value chains, and build a multinational diamond model with China as the core by ODI, China should transfer its low-end marginal industries to other developing countries, and attempt to link the high-end advantageous industries in developed countries.
1. Introduction
Over the past three decades, China’s export-led growth mode has obtained tremendous success in economic growth and export promotion. Now, China’s GDP ranks second just next to US in the world, and it is the largest exporter and foreign reserve accumulator and the second largest foreign trader. In accordance with the fame of “World Factory”, China is also the largest manufactured goods producer, fixed capital investor, energy and raw materials consumer and CO2 emitter in the world, which has engendered prolonged worldwide impacts on manufactures supply, commodities demand and environmental conservation.
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2. Chinese Economy: Facts, Challenges and Prospect
In this section, we undertake a comprehensive investigation on the current circumstances of Chinese economy in terms of economic growth, foreign trade, fixed capital investment, cross-border direct investment, foreign reserve accumulation, and outward investment return. The most comprehensive and complicate challenges of Chinese economy is middle income trap. The new normal state is a vitally important target for Chinese economic development in the coming decade.
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3. Chinese ODI’s Facts, Challenges and Policy Suggestions
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4. Outward FDI, The Extension of Production Chains and Upgrading of China’s GVCs
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