Palonka & Prokurat: Chinese Outward Direct Investments – Structure and Geography

This article provides useful analysis of Chinese investment modes, including the use of reverse mergers in Western markets (a technique that is legal but recently brought enhanced scrutiny by the SEC after a series of accounting frauds involving Chinese firms).

ABSTRACT:

The scope and dynamics of Chinese foreign outward investments (ODI) is one of phenomena characterizing the growing economic strength and internationalization of Chinese economy. The article presents the geographic and sectorial trends of these investments apparently driven also by requirement of enormous foreign reserves diversification. The major actors performing are: sovereign funds, state owned banks and enterprises, big private and semi-private companies, and rich individuals. Major goals of ODI was a security of resources and market expansion. The newest trend however, still very limited though, is to access developed economies via mergers and acquisitions (M&A). Individual contracts prove apparently that Chinese institutions and companies are willing to obtain necessary technology, know-how and experience to operate on global stage. Majority of them operate in Asia- Pacific region but subsequently there is greater penetration of developed markets. This area however is resisting free Chinese expansion partly for strategic or military reasons (this refers mainly to USA), partly for unfair competition of state supported enterprises. In particular unequal public procurement rules , state subsidies and favourable credit access (UE case ).

 

Available for download here.

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