Go_Out_policy

Go Out policy

Go Out policy

Chinese national policy supporting overseas investment by Chinese companies

Go Out policy[1] (Chinese: 走出去战略; pinyin: Zǒuchūqù Zhànlüè) or the Going Global Strategy, is the People's Republic of China's current strategy to encourage its enterprises to invest overseas. The policy was announced as a national strategy by Jiang Zemin in March 2000.

History

Jiang Zemin first began encouraging domestic enterprises to "go global" and enter foreign markets in 1996, a time when the domestic market was showing signs of stagnation.[2]: 76  In Jiang's view, Going Out into foreign markets was necessary to advance China's development.[3]: 56  In 1999, the government began promoting Chinese investments abroad as the Go Out policy[4] and Jiang formally announced it as a national strategy in March 2000.[3]: 56  The policy was implemented top-down from central government leadership.[5]: 123  The policy it was incorporated into the report of the communist party's 16th National Congress.[2]: 77 

During Jiang's tenure, the policy greatly expanded China's investment and influence in global South countries, especially those in Africa and Asia.[5]: 124 

The Government, together with the China Council for the Promotion of International Trade (CCPIT), has introduced several schemes to assist domestic companies in developing a global strategy to exploit opportunities in the expanding local and international markets.

The programs launched so far by the Chinese Government have these goals in mind:

  1. increase outbound foreign direct investment (FDI)
  2. pursue product diversification
  3. improve the level and quality of the projects
  4. expand financial channels with respect to the national market
  5. promote brand recognition of Chinese companies in EU and US markets

Since the launching of the Going out Strategy, interest in overseas investing by Chinese companies has increased significantly especially among State Owned Enterprises. Statistics indicate that Chinese direct foreign investments rose from US$3 billion in 1991 to US$35 billion in 2003.[6] This trend was underscored in 2007, when Chinese FDI reached US$92 billion.[7] This boost in foreign investment can also be attributed to the Chinese Government's ability and commitment to create the right environment for foreign investment; and China's huge production capacity, coupled with low labor costs. With a dynamic economy, and a strong business-friendly culture, the outlook for Chinese companies will continue to be positive.

China's sovereign funds have supported efforts to Go Out, including by helping Chinese enterprises finance mergers and acquisitions abroad.[3]: 11  In 2015 for example, China Investment Corporation turned one of its divisions into the wholly-owned subsidiary CIC Capital. This move was intended to support the Belt and Road Initiative including by conducting foreign direct investment and by supporting state-owned enterprises of China engaged in mergers and acquisitions in economic sectors prioritized by the state.[3]: 114 

As part of its efforts to restructure state-owned enterprises, the Chinese government has established the SASAC (State-Owned Asset Supervision Administration Commission), which develops China's equity exchange market, while supporting Chinese foreign investments. SASAC's responsibilities include:

  1. supervision and evaluation of state-owned enterprises
  2. oversight of state-owned assets
  3. recruiting of top executive talent
  4. drafting of laws, administrative rules and regulations that promote increased development of corporate law in China
  5. coordination of local state-owned assets as prescribed by law[8]

The SASAC operates through several equity exchanges such as CBEX (China Beijing Equity Exchange), which is the largest and most prestigious in terms of trading volume. It is headquartered in the heart of Beijing financial district. Presently, CBEX has established three international platforms in Italy, Japan and the United States of America. The Italian CMEX (China Milan Equity Exchange), created in 2007, is CBEX's first international partner, operating as a liaison to facilitate the penetration of Chinese companies into the Italian and European markets and of European companies in China. Following the trend of the Go out policy, some of the most prominent Chinese professional institutions are expanding their business on the international markets.

In 2015, the Ministry of Agriculture issued the Strategic Plan for Agricultural Going Out, providing state subsidies to enterprises that invested in various overseas locations.[9]: 251 

Examples of the Go Out policy

Emerging markets have been an important part of China's going out strategy.[10]: 225  For example, in Africa Chinese direct investment rose from $1 billion in 2004 to $24.5 billion by 2013.[2]: 77 

Overseas SEZs

From 1990 to 2018, Chinese enterprises established eleven SEZs in sub-Saharan Africa and the Middle East including: Nigeria (two), Zambia, Djibouti, Kenya, Mauritius, Mauritania, Egypt, Oman, and Algeria.[11]: 177  Generally, the Chinese government takes a hands-off approach, leaving it to Chinese enterprises to work to establish such zones (although it does provide support in the form of grants, loans, and subsidies, including support via the China Africa Development Fund).[11]: 177  These zones fall within the Chinese policy to go out and compete globally.[11]: 182 

The first Chinese overseas SEZs facilitated the offshoring of labor-intensive and less competitive industries, for example in textiles.[11]: 177  As Dawn C. Murphy summarizes, these zones now "aim to transfer China's development successes to other countries, increase business opportunities for China manufacturing companies, avoid trade barriers by setting up zones in countries with preferential trade access to important markets, and create a positive business environment for Chinese small and medium-sized enterprises investing in these regions."[11]: 177 

Agricultural enterprises in Africa

Since the mid-1990s, China has encouraged its agricultural enterprises to seek economic opportunities abroad as part of its go out policy, including to Africa.[11]: 188  Chinese policy guidance has specifically encouraged such efforts in rubber, oil palm, cotton, vegetable cultivation, animal husbandry, aquaculture, and assembly of agriculture machines.[11]: 188  The encouragement for agricultural enterprises to go out has also resulted in the creation of Agricultural Technology Demonstration Centers in African countries.[11]: 184  The function of these centers is to transmit agricultural expertise and technology from China to developing countries in Africa while also creating market opportunities for Chinese companies in the agricultural sector.[11]: 184  China is motivated to establish these centers out of both an ideological commitment to fostering South-South cooperation and sharing its experience with less developed countries and by a pragmatic desire to increase its long-term food security.[11]: 182–188 

China first announced its Agricultural Technology Demonstrations Centers at the 2006 meeting of the Forum on China-Africa Cooperation. It launched 19 of these centers between 2006 and 2018, all in sub-Saharan Africa.[11]: 184  As of 2023, ATDCs have been established in 24 African countries.[12]: 173 

Energy

Because the more accessible oil resources had already been claimed, when China National Petroleum Company and other enterprises went out, they tended to enter less politically stable countries with greater political and security risks.[2]: 77 

See also

References

  1. [1]
    Steve Wang, Lin Wanxia (19 November 2016). "Hunger for foreign know-how propels surge in Chinese ODI". www.atimes.com. Retrieved 21 November 2016.
  2. [2]
    Meng, Wenting (2024). Developmental Peace: Theorizing China's Approach to International Peacebuilding. Ibidem. Columbia University Press. ISBN 9783838219073.
  3. [3]
    Liu, Zongyuan Zoe (2023). Sovereign Funds: How the Communist Party of China Finances its Global Ambitions. The Belknap Press of Harvard University Press. doi:10.2307/jj.2915805. ISBN 9780674271913. JSTOR jj.2915805. S2CID 259402050.
  4. [4]
    更好地实施“走出去”战略 2006年03月15日
  5. [5]
    Garlick, Jeremy (2024). Advantage China: Agent of Change in an Era of Global Disruption. Bloomsbury Academic. ISBN 978-1-350-25231-8.
  6. [6]
    UN report: China becoming major investor abroad January 07, 2004 People's Daily Online
  7. [7]
    China's direct investments abroad top $92b by 2007 2008-04-17 Xinhua
  8. [8]
    Main Functions and Responsibilities of SASAC
  9. [9]
    Harrell, Stevan (2023). An Ecological History of Modern China. Seattle: University of Washington Press. ISBN 9780295751719.
  10. [10]
    Eisenman, Joshua; Heginbotham, Eric (2023). "China's Relations with the Global South". In Kironska, Kristina; Turscanyi, Richard Q. (eds.). Contemporary China: a New Superpower?. Routledge. ISBN 978-1-03-239508-1.
  11. [11]
    Murphy, Dawn C. (2022). China's Rise in the Global South: the Middle East, Africa, and Beijing's Alternative World Order. Stanford, California: Stanford University Press. ISBN 978-1-5036-3060-4. OCLC 1249712936.
  12. [12]
    Shinn, David H.; Eisenman, Joshua (2023). China's Relations with Africa: a New Era of Strategic Engagement. New York: Columbia University Press. ISBN 978-0-231-21001-0.
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