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  • Thinking About China’s Strategy for Foreign Investment and Establishing an Overseas Presence

Thinking About China’s Strategy for Foreign Investment and Establishing an Overseas Presence

|China

It is said that the third boom for investment to China arrived with China’s entry into the WTO. Direct investment (i.e. investment actually carried out) to China largely increased, by 14.9% in 2001 compared with the previous year, and by 18.8% in the first half of this year compared with the same period of the previous year. About four hundred thousand foreign-affiliated companies are registered in China. Never before has any other country been the focus of such a volume of foreign investment. This is why China is called “the world’s factory”.

Goods manufactured in “the world’s factory” are exported to countries throughout the world, making China the sixth-largest trade power in the world. More than half of the value of exports is earned by foreign companies that have expanded into China. Although Chinese products have taken markets abroad by storm and there have been specious whispers of the “China threat theory”, there is no “China threat theory” from China’s point of view, since China provides production sites for foreign investors to earn money. Under such circumstances, it would be no surprise if a “foreign investment threat theory” were to emerge in China. China is going to stick with its policy of actively introducing foreign investment, while simultaneously embarking upon a strategy for actively making its debut on the global stage in terms of overseas investment and expansion.

The business collaboration between Haier, the biggest Chinese consumer electronics maker, and Sanyo Electric of Japan, which became a topic of conversation when it was announced at the beginning of this year, is only one of many such examples. i As many as 6,758 Chinese companies (excluding banking institutions) had established an overseas presence by the end of June 2002. ii It is expected that the number will increase greatly in the future due to China’s entry into the WTO, with Chinese companies establishing overseas production centers and joint ventures, undertaking mergers and acquisitions and joining stock markets abroad. iii It will not be long before Chinese companies land in Japan and establish a presence here in various ways. There have been fears about the hollowing out of Japanese industry since Japanese companies began moving into China, so I would like to suggest that preparations be made to welcome Chinese companies – including those collaborating with foreign companies based in China – to Japan, in order to fill that hollow. Japan is lagging far behind Europe and America in preparing for China’s overseas expansion and investment debut.

In this regard, I have great expectations of Japanese local authorities. Supporting local companies that have moved into China is important, but, from the mid- to long-term perspective, I strongly hope that they will create a “platform” for receiving Chinese companies establishing themselves in Japan. It will contribute to the revitalization of the economy to a great extent. It may sound as though I am repeating myself, but a boom in the overseas expansion of Chinese companies is definitely on its way. I hope to see a positive response to the boom before it occurs, with prefectures initiating the joint study by businesses, the government and academia of China’s strategy for global expansion. Were some case studies of Chinese companies moving into Japan to be made, it would be a significant first step towards renewed economic exchange between Japan and China in the 21st century.

[Translated by ERINA]

  1. Other examples of business collaboration include a partnership between TCL of China and Matsushita Electric Industrial of Japan, and one between Hisense of China and Sumitomo Corporation.
  2. Of which, 382 Chinese companies have built production facilities abroad.
  3. For example, in 2001, Shenyang selected 10 large state-owned companies in such sectors as motor vehicles, auto parts, pharmaceuticals, chemical industry, light industry and spinning and weaving, and undertook various activities to promote the overseas expansion of these businesses. It is reported that negotiations regarding the establishment of venture businesses took place among such companies as Shenyang Transformer Co., Ltd. and a major French heavy electric machinery maker, Shenyang Wind Disturbance Machine Tool Co., Ltd. and a leading Swedish industrial equipment company, foodstuffs company Hongmei Corporation of China and a major Japanese company, and consumer electronics company Hua Li Corporation and a leading Japanese company.