國
立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
76
7. Conclusion
Previous chapters have substantially proved what are the most important drivers for Chinese investment in the region of CEE. These, however, do vary as different countries within the region are likely to play different roles and hence are preferred in the view of different motivations. These discrepancies are similar to those China makes between the developed and developing countries. Yet at the same time it is important to stress, that the role of CEE lies, due its special nature of being and adjacent area to Western European markets, somewhere in middle of these. A number of theoretical perspectives offer decently developed explanations for this behavior.
Let‟s sum up this paper in a bit more detailed manner.
Since China lumped up 16 different countries together in a rather haphazard manner, it is irrational to suggest that all of the countries assume the same position.
Although all of them were studied as a unitary region and certain coherence is from the Beijing‟s point of view clearly perceivable, there are huge differences within the region itself. Since there are great discrepancies among the level of corresponding proxies, it is clear that different states may serve different purposes. Correspondingly, the Chinese FDI in each of these countries differs in the terms of sectoral distribution.
Although hard to prove, these differences in preferences of each motivation may also explain diverse attitudes of Chinese SOEs – often inking the major deals – from the behavior of SMEs.
While some of the motivations discussed are greatly significant, some are less and some were disproved, as suggested earlier. There is, nevertheless, one core fact that should be carried in mind. Drawing on the results, readers should not understand them as singularities – quite to the contrary, most of them are closely linked with each other. Political proximity and Culture closeness would highly likely correlate with each other regardless of the inward FDI. The mutual relation between Logistics, Export and Openness to FDI is greatly pictured on the case of Hungary. Having a decent infrastructure already, Budapest realized the nature of Chinese aims to connect the Greek ports with Western Europe and hence initiated subsidies into infrastructure projects that soon started to take place. By such behavior it only boosted its abilities to serve as a hub and export center for Chinese companies that opened their distribution centers in Hungary in response. Other cases may be found and discussed in response.
‧
國立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
77
It has been suggested that as much as 60% of Chinese invested capital is of private origin. Although the actual nature of the capital invested as well as its distance from the Communist Party of China is hard to check, and most of non-state business would arguably follow the logic of the market, the biggest deals concluded often tend to incorporate certain political background. This has two explanations. First, the biggest projects are often carried out by Chinese SOEs and hence naturally receive their governmental backing; and second, these big projects have usually impact of such importance that political discussion is necessary. From this perspective I argue that it is vital to make differences between capital of private and public origin as they may respond to different motivations. Yet at the same time, due to governmental peculiarities on the Chinese side, it is important to stay aware that the former may also be the latter.
Indeed, one of the most controversial question is whether Chinese SOEs follow a political agenda and help promote the goals of China‟s foreign policy. Since political proximity is one of the motivations I proved, regardless of the causality, it seems right. On the other hand many of the investment projects go along well-established value chains and do not deviate from a regular strategy of corporational survival, to which the actual notion of being linked to the Communist government may serve as a hindrance. Jie Yu in this case offers a brilliant explanation:
In the light of their increasing overseas activities, there is no doubt that Chinese firms play a significant role in China’s foreign-economic policy.
On the one hand, most Chinese firms benefit from both monetary and political support from the government. They are encouraged to act aggressively across the world to acquire natural resources and cutting-edge technologies. On the other hand, as firms, their close links with the government have hindered their business plans, as they have made economic and political compromises both at home and abroad in order to fi t with Beijing’s priorities.254
254 Yu, J., “China's geoeconomic strategy: firms with Chinese characteristics: the role of companies in Chinese foreign policy,” in Kitchen, N. (eds), IDEAS reports – special reports, LSE Ideas No. 12, The London School of Economics and Political Science, London, UK, 2012, p. 37.
‧
developing countries differs greatly. While developed countries are sources of potential know-how and new technology, developing countries are seen as new big markets for Chinese products or as sources of raw material.255 The sectoral distribution of Chinese FDI in CEE and my motivation analysis prove that this region is somewhere in the middle.256 The comparison of CEE as a whole with other studies shows that from the Chinese point of view of potential FDI targets, CEE does play a role different from other regions. It is thought that this very nature of their “hybrid economies” between emerging markets and developed economies is what China sees as a both promise and challenge. This new dimension of investment opportunities and business ventures is what Beijing sees as most appealing.257 The idea of hybrid economies is indeed a common one and may play an important role. While institutionally and governmentally these countries show promise; they are politically and economically are also considered stable at the same time. Yet their level of irrational to look at the region of CEE without seeing its strategic location right next to the big and wealthy Western European markets. Along with the special nature of CEE‟s economies with all of their potential comparable advantages, its role of a gate into Europe is the one China hopes it will play. Ekholm‟s “export-platform” foreign direct investment theory is hence a great explanation of what China hopes to do.This is not, however, the only theoretical approach that may help explain what is going on. Interestingly enough, from the theoretical point of view, the whole array
255 Élteto, A., Szunumár, Á., 2016.
256 Ibid.
257 Golonka, M., 2012.
258 Ibid., p. 9.
‧
國立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
79
of theories, from the most basic concepts of cost of capital in different regions all the way to those tailor-made on the China‟s case seem to have partial explanatory power.
To assess the theoretical perspectives on China‟s FDI in this region and follow the Dunning perspective, we may agree that market-seeking, efficiency seeking as well as strategic-assets seeking behavior are all taking place. The only one that is missing is natural resource seeking motivation. This, however, was not for obvious reason even studied. Dunning‟s basic theory on FDI is a great explanation tool, but other more specific points of views prove to possess similar explanatory power.
‧
1) 2014 Statistical Bulletin of China’s Outward Foreign Direct Investment, Ministry of Commerce of the People‟s Republic of China, 2015
2) Amighini, A. et al, “Investigating Chinese Outward Foreign Direct Investments:
How Can Firm-level Data Help?,” China and World Economy, Vol. 22, Issue 6, pp 44-63, November-December 2014
3) Asia Times, “China becomes world‟s top net capital exporter,” February 2016 4) Aykut, D., “Outward FDI from developing countries are up, notably South-South
flows,” The World Bank Blog, June 2011
5) Baker and Mackenzie, “Chinese Investment into Europe hits record high in 2014,”
February 2015.
6) Bano, S. and Tabbada, J., “Foreign Direct Investment from Developing Countries:
Evidence, Trends and Determinants,” NZAE, Conference Paper, June 2012
7) Bano, S. and Tabbada, J., “Foreign Direct Investment Outflows: Asian Developing Countries,” Journal of Economic Integration, Vol. 30, No. 2, June 2015
8) Bénassy-Quéré et al., “Institutional Determinants of Foreign Direct Investement,”
CEPII, Working Paper No 2005-05, April 2005
9) Berning, S.C. and Holtbrugge, D., “Chinese Outward Foreign Direct Investment – a Challenge for Traditional Internationalization Theories?,” Journal für Betriebswirtschaft, Vol. 62, Issue 3, pp 169-224, December 2012
10) Buckley, P. et al, “The Determinant of Chinese Outward Foreign Direct Investment,” Journal of International Business Studies, Vol. 38, Issue 4, pp 499-518, July 2007
11) Buckley, P. J. and Casson, M., “The optimal timing of a foreign direct investment,”
Economic Journal, 91(361), 1985
12) Burgoon, B. and Raess, D., “Chinese investment and European labor: should and do workers fear Chinese FDI?,” Asia Europe Journal, 12(1‐2), 2014
13) Burnay, M. et al., “China‟s foreign policy and external relations,” DGFP Study, European Parliament, July 2015
14) Castro, F.B., “Foreign Direct Investment in the European Periphery,” PhD. Thesis, The University of Leeds, July 2010.
15) Chang, S., “The Determinants and Motivations of China's Outward Foreign Direct Investment: A Spatial Gravity Model Approach,” Global Economic Review, Vol.
43, Issue 3, 2014
16) Cheng, L. K. & Ma, Z., “China's outward foreign direct investment,” Paper presented at the Indian Statistical Institute, December 2008
17) Cheung, Y. W. and Qian X. W., “The Empirics of China's Outward Direct Investment,” Conference Paper, Macro, Money and International Finance, Munich, March 2008
‧
18) China Global Investment Tracker, The Heritage Foundation, Washington, 2016, (accessible from: https://www.aei.org/china-global-investment-tracker/)
19) Ciensky, J., “China buys into Polish bulldozers,” Financial Times, May 2011 20) Ciensky, J., “China group sees collapse of Poland ambitions,” Financial Times,
Warsaw, June 2011
21) De Beule, F. and Van Den Bulcke, D., “Locational determinants of outward foreign direct investment: an analysis of Chinese and Indian greenfield investment,” Transnational Corporations, Vol. 21/1, Issue 1, April 2013
22) Deng, P., “Outward investment by Chinese MNCs: Motivations and implications,”
Business Horizons, 47(3), 2004
23) Dreger, C. et al, “Determinants of Chinese Direct Investments in the European Union,” Deutsches Institut für Wirtschaftsforschung, Discussion paper 1480, 2015.
24) Du Bois, G. and Birtha, M., “Hungary: the flagship of China in Europe?,”
Nouvelle Europe, June 2015
25) Du Bois, G. and Davidova, M., “China and the Czech Republic, a recent political shift,” Nouvelle Europe, June 2015
26) Dunning, J.H. 1993, Multinational enterprises and the global economy, 1993, Workingham.: AddisonWesley.
27) Eckholm, K. et al., “Export-platform foreign direct investment,” NBER, Working Paper 9517, 2003
28) Élteto, A., Szunumár, Á., “Chinese Investment and Trade – Strengthening Ties with Central and Eastern Europe,” International Journal of Business and Management, Vol. IV, No. 1, 2016
29) Engleman, E., “Huawei, ZTE Provide Opening for China Spying, Report Says,”
Bloomberg, October 2012
30) Europost, “China woos Eastern Europe,” November 2015
31) Filippov, S. and Saebi, T., “Europeanisation Strategy of Chinese Companies: Its Perils and Promises,” UNU-MERIT Working Papers, Maastricht Economic and social Research and training Centre on Innovation and Technology, 2008
32) Fontagné, L, and Py, L, “Determinants of Foreign Direct Investment by Chinese Enterprises in the European Union,” CEPII Research Report, No. 01, July 2010 33) Fox, J. and Godement, F., “A Power Audit of EU-China Relations,” European
Council on Foreign Relations, April 2009
34) Franco, C. et al, “Why Do Firms Invest Abroad? An Analysis of the Motives Underlying Foreign Direct Investments,” The IUP Journal of International Business Law, Vol. 9, Nos. 1 & 2, January & April 2010
35) Fuchs, A. and Klann, N.-H., “Paying a visit: The Dalai Lama effect on international trade,” Journal of International Economics, No. 91, 2013, p. 164-177 36) Garcia-Herrero, A., Xia, L., and Casanova, C., “Chinese outbound foreign direct
investment: How much goes where after roundtripping and offshoring?,” BBVA Research, Working Paper No. 15/17, June 2015
37) GBTimes, “Huawei opens logistics base in Hungary,” December 2014
‧
investment boom Outlook for China‟s outward foreign direct investment,” March 201539) Gill, A. and Singh, L., “Internationalization of Firms from Emerging Economies:
Theory, Evidence and Policy,” Punjabi University, March 2012
40) Giusti, S., “China: an emerging stakeholder in Eastern Europe,” Instituto Per Gli Studi di Politica Internazionale, ISPI Analysis No. 153, January 2013
41) Godement, F., “China Goes for the New Europe in Warsaw,” E!Sharp, April 2012 42) Golonka, M., “Partners or Rivals? Chinese Investments in Central and Eastern
Europe,” Central and Eastern Development Institute, Warsaw, Poland, 2012 43) Goh, B., “China proposes joint financing firm with central and east Europe,”
Reuters, November 2015
44) Grzegorczyk, M., “Poland fails to improve its investment incentives,” Central European Financial Observer, September 2015
45) Hsiao, R. and Czekaj, M., “Is Hungary Becoming China‟s Hub in Central Europe?,” The Jamestown Foundation, China Brief Volume, No. 11, Issue 13, 2011
46) Ikemoto, S., “Globalization and Japanese Investment in the Czech Republic,”
Bulletin of Research Institute of Economic Science, Vol. 37, 2007
47) InSerbia Network Foundation, “Zemun-Borca bridge to be completed by December 2014,” January 2014
48) Jacoby, W., “Different cases, different faces: Chinese investment in Central and Eastern Europe,” Asia Europe Journal, Vol. 12, Issue 1, pp 199-214, March 2014 49) Jacoby, W., “Chinese Investment in the Balkans,” Council for European Studies,
Critical Commentary, December 2015
50) Jaroch, E., “China‟s Foreign Policy Towards CEE Countries: Determinants, Development And Problems,” People’s Square, March 2016
51) Klauberg, T., “Foreign Investments in Central and Eastern Europe,” Union Internationale des Avocats, November 2013
52) Kolstad, I. and Wiig, A., “What determines Chinese outward FDI?,” CMI Working Paper, WP 2009:3
53) Kopecký, V. et al., “Nová Hedvábná cesta: výzvy a příležitosti,” Asociace pro Mezinárodní Otázky, Research Paper 1/2016, March 2016
54) Korniyenko, Y. and Sakatsume, T., “Chinese Investment in the Transition Countries,” European Bank for Reconstruction and Development, Working paper no. 107, January 2009
55) Latham, K. and Wu, B., Chinese Immigration into the EU: New Trends, Dynamics and Implications, Europe China Research and Advice Network, London, 2013 56) Li, Q. and Liang, Q., “Political Relations and Chinese Outbound Direct
Investment: Evidence from Firm- and Dyadic-Level Tests,” Research Center for Chinese Politics and Business, Working Paper No. 19, Indiana University, 2012
‧
57) Lina, L. and Ma, H., “Overview of Outward FDI Flows of China,” International Business Research, Vol. 4, No. 3, July 2011
58) Liu, Z., “All Aboard the China-Europe Express,” Visegrad Insight, November 2015
59) Mathews, J.A., “Dragon multinationals: New players in 21st century globalization,” Asia Pacific Journal of Management, Vol. 23, Issue 1, March 2006 60) Matura, T., “China-CEE Trade, Investments and Politics,” UACES 45th Annual
Conference Paper, Bilbao, Spain, September 2015
61) Michigan State University, “globalEDGE,” 2016 (accessible from:
http://globaledge.msu.edu/)
62) Milelli, C. and Sindzingre, A., “Chinese Outward Foreign Direct Investment in Developed and Developing Countries: Converging Characteristics?,” EconomiX Working Papers no. 34, University of Paris West - Nanterre la Défense, 2013 63) Morck, R. et al, “Perspectives on China‟s Outward Foreign Direct Investment,”
Journal of International Business Studies, 2008
64) Mráz. S. and Brocková, K. (eds), Current Trends and Perspectives in Development of China – V4 Trade and Investment, Visegrad Fund, Bratislava, 2014
65) National Statistical Offices of CEE countries (as indicated)
66) Nayak, D. and Choudhury R. N., “A selective review of foreign direct investment theories,” Asia-Pacific Research and Training Network on Trade, Working paper No. 143, March 2014
67) Nitsch, V., “State Visits and International Trade,” World Economy, Vol 30, pp 1797-1816, 2007
68) OECD Factbook 2013: Economic, Environmental and Social Statistics, OECD, 2013 (accessible from: http://www.oecd-ilibrary.org/sites/factbook-2013-en/04/02/01/index.html?itemId=/content/chapter/factbook-2013-34-en)
69) Popescu, G., “FDI and Economic Growth in Central and Eastern Europe,”
Sustainability, 2014, 1(11)
70) Pradhan, J. P., “Emerging Multinationals: A Comparison of Chinese and Indian Outward Foreign Direct Investment,” International Journal of Institutions and Economies, Vol. 3, No. 1, April 2011
71) Puccio, L., “Granting Market Economy Status to China,” European Parliamentary Research Service, November 2015
72) Ramani, S., “China‟s Growing Ties With Serbia,” The Diplomat, February 2016 73) Ramasamy, B., et al, “China‟s outward foreign direct investment: Location choice
and firm ownership,” Journal of World Business, Vol. 47, Issue 1, January 2012 74) Rosen, D.H. and Hanemann, T., “China's direct investment in advanced
economies: the cases of Europe and the United States,” China Economist, Volume 8, 2013
75) Safarikova, K., “Chinese hangover in Prague,” EU Observer, April, 2016
‧
76) Sauvant, K., Maschek, W., McAllister, G. (eds), Foreign Direct Investment from Emerging Markets: Challenges ahead, Palgrave Macmillan US, 2010
77) Sedmihradsky, M. and Klazar, S., “Tax Competition for FDI in Central-European Countries,” CESifo Working Paper Series, No. 647, January 2002
78) Simurina, J., “China‟s Approach to the CEE-16,” Europe China Research and Advice Network, Short Term Policy Brief, No. 85, January 2014
79) South China Morning Post, “Chinese investment overseas soars as the domestic economy loses steam,” June 2015
80) Stoian, C. and Filippaios, F., “Dunning's eclectic paradigm: A holistic, yet context specific framework for analysing the determinants of outward FDI: Evidence from international Greek investments,” International Business Review, Vol 17, Issue 3, June 2008
81) Stratfor, “China's Outward Push in High-Tech Investment and Innovation,”, June 2015
82) Szunomár Á. (eds), Chinese investments and financial engagement in Visegrad countries: myth or reality?, Budapest: Institute of World Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences, 2014
83) Szunomár, Á., McCaleb, A., “Comparing Chinese, Japanese and South Korean FDI in Central and Eastern Europe: macroeconomic versus institutional factors,”
(preliminary research version), 2015 (accessible from:
87) The World Bank, “High-Technology exports (current US$),” 2016 (accessible from: http://data.worldbank.org/indicator/TX.VAL.TECH.CD)
88) The World Bank, “ICT goods exports (% of total goods exports),” 2016 (accessible from: http://data.worldbank.org/indicator/TX.VAL.ICTG.ZS.UN) 89) The World Bank, “Logistics performance index,” 2016 (accessible from:
http://data.worldbank.org/indicator/LP.LPI.OVRL.XQ/countries/1W?display=def ault)
90) The World Bank, “Worldwide Governance Indicators,” 2015 (accessible from:
http://data.worldbank.org/data-catalog/worldwide-governance-indicators)
91) Thite, M. et al., “Internationalization of emerging Indian multinationals: Linkage, leverage and learning (LLL) perspective,” International Business Review, 2015 92) Tiezzi, S., “China‟s „Belt and Road‟ Reaches Europe, The Diplomat, November
2015
‧
European Countries,” European Trade Study Group, 201194) Technet, “Na kradení technologií ma čínská vláda obří systém. Říká tomu
„přesun‟,” March 2016
95) Transparency International, “Corruption Perception Index,” 2016
96) Turcsányi, R., “Central and Eastern Europe‟s courtship with China: Trojan Horse within EU?,” European Institute for Asian Studies, January 2014
97) Turcsányi, R. Q., “Is the Czech Republic China‟s New „Bridge to Europe‟,?” The Diplomat, September, 2015
98) Tuszynski, R., “Polish Perspectives on CEE-China 16+1 Cooperation: the unexpected Ukrainian factor,” Europolity, Vol. 9, No. 1, 2015
99) UNDP, “Education Index,” Human Development Reports, 2015
100) Wadhwa, K., “Foreign Direct Investment into Developing Asian Countries:
The Role of Market Seeking, Resource Seeking and Efficiency Seeking Factors,”
International Journal of Business and Management, Vol. 6, No. 11; November 2011
101) World Bank Group, “ Doing Business 2016: Measuring Regulatory Quality and Efficiency,” Washington, 2016
102) World Justice Project, “Rule of Law Index,” 2015
103) World Politics Review, “Limited Payoff for China‟s Investment in Central and Eastern Europe,” April 2016
104) Yeung, H. W. C., & Liu, W., “Globalizing China: the rise of mainland firms in the global economy,” Eurasian Geography and Economics, 49(1), 2008
105) Yin, W., “Motivations of Chinese outward foreign direct investment: an organizing framework and empirical investigation,” Journal of International Business and Economy, Vol. 16, Issue 1, 2015
106) You, K., “What drives China‟s outward FDI? A regional analysis,” BOFIT Discussion Papers, No. 16, 2015
107) Yu, J., “China's geoeconomic strategy: firms with Chinese characteristics: the role of companies in Chinese foreign policy,” in Kitchen, N. (eds), IDEAS reports – special reports, LSE Ideas No. 12, The London School of Economics and Political Science, London, UK, 2012.
108) Zalan, E., “Divided EU debates China market economy status,” EU Observer, January 2016
109) Zeneli, V., “Why is China So Interested in Central and Eastern Europe?,” The Globalist, June, 2014
110) Zhang, H., “Chinese Outward Foreign Direct Investment in the EU,” EUSME Centre, Beijing, July, 2014
111) Zhen, L. and Wu, W., “China puts links with central and eastern Europe on the fast track,” South China Morning Post, November, 2015
112) Zhou, L. and Leung, D., “China‟s Overseas Investments, Explained in 10 Graphics,” World Resources Institute, January 2015
‧
國立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
86
Appendix One: Correlation analysis in graphs
All of the charts in this section represent the graphical outcomes of the correlation analysis as described. The X axis represents the amount of FDI (stock, 2014) received from China and the Y axis represents given proxies.
Chart 4: Correlation coefficient of China‟s OFDI stock with number of Chinese residents
Chart 5: Correlation coefficient of China‟s OFDI stock with absolute net inflows of FDI
‧
國立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
87
Chart 6: Correlation coefficient of China‟s OFDI stock with nominal amount of high-technology exports
Chart 7: Correlation coefficient of China‟s OFDI stock with absolute amount of mutual trade
‧
國立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
88
Chart 8: Correlation coefficient of China‟s OFDI stock with country‟s total exports
Chart 8: Correlation coefficient of China‟s OFDI stock with country‟s total exports