China’s Economy in the Post-WTO Environment

China’s Economy in the Post-WTO Environment

Stock Markets, FDI and Challenges of Sustainability

Advances in Chinese Economic Studies series

Edited by Lilai Xu

The book explores the implications of both the extension of the market into key parts of the Chinese economy and the integration of China into the global economy. The main focus of the book is on the role and nature of China’s financial system and its ability to transform enterprise and household behaviour and the performance of investment finance, notably in the context of a two-way flow of foreign direct investment. All the extensive chapters highlight the issue of sustainability – some see the incompleteness of market reform as a problem; others are more willing to accept a pragmatic blending of the operation of the free market and government intervention.

Chapter 4: Going Global: China’s Outward Foreign Direct Investment

Lilai Xu

Subjects: asian studies, asian economics, economics and finance, asian economics, financial economics and regulation, international economics


Lilai Xu INTRODUCTION The rapid emergence of China as a major player in the global economy has been remarkable, yet has had mixed consequences for the rest of the world. An important element in this economic rise is foreign direct investment (FDI). Following the global financial crisis, FDI outflows from developing countries amounted to US$229 billion in 2009, a fall of 23 percent over 2008, marking the end of a five-year upward trend (UNCTAD, 2010). This contraction, however, was less severe than that which occurred in developed countries. As a result, developing countries have since strengthened their position as emerging sources of FDI. Starting from virtually no outward foreign direct investment (OFDI) in the 1980s, FDI from China in 2009 reached US$56.5 billion (including investment in the financial sector), standing respectively as the first and fifth largest among developing economies and in the world (see Appendix Figure 4.A1). Yet outflows from China still remain well below its share of FDI inflows, which amounted to US$108 billion in 2009. Drawing on recent Government of China statistics (2002–09), this  chapter takes a closer look at the structure, determinants and effects  of FDI from China against the backdrop of the country’s ‘Go global’ strategy. Emphasis is placed on the mode of entry into industrialized economies and the importance of integrating quickly and deeply into local communities. The prospects for China’s future FDI outflows are discussed based on its own and Japan’s past experience. The remainder of this chapter is...

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