The Strategy of foreign-invested manufacturing enterprises in China: Export-orientated and market-orientated FDI revisited

Abstract

This paper examines export-orientated and market-orientated foreign direct investment (FDI) in China's manufacturing industry. Based on Fung's (1995) survey estimation of China's market-orientated FDI in 1992 and China's Third National Industrial Census in 1995, we quantify the proportion of market-orientated FDI in China 1992-2002. By combining and verifying various data sources, our estimation shows that market-orientated FDI accounts for the majority of China's total inward FDI in manufacturing industry and has grown faster than export-orientated FDI over the period 1992-2002. Our industry level analysis suggests that Overseas Chinese investors are more export-orientated than Western investors. The study suggests that many inward investors follow a dual market strategy. The coexistence of export-orientated and Chinese domestic market-orientated FDI is a reflection of the flexibility of MNEs to adjust and adapt ownership attributes to the local market context. The study offers insights into the evolutionary development path taken by foreign-invested manufacturing enterprises in China.Export-orientated FDI, market-orientated FDI, foreign-invested enterprises (FIEs), China, Jel Codes: L1, M21,

Economic growth in the presence of FDI: The perspective of newly industrialising economies

“…By the end of 2003, they provided over 53%. In some high-tech sectors in 2000, the share of foreign invested firms in total exports was as high as 91% in electronic circuits and 96% in mobile phones (Buckley and Chen, 2005;UNCTAD, 2003). The latest data released by the World Trade Organisation (WTO, 2005) indicate that China's total exports in 2004 were $593 billion, and imports $561 billion, both surpassing the respective values of Japan's at $565 billion and $455 billion, making China the third largest trading partner in the world in both exports and imports.…”

“…FDI inflows into China continued to rise in recent years, reaching $52.7 billion by 2002, and $62 billion in 2004, accounting for over 10% of the world's total. Buckley and Chen (2005) show that FDI inflows into China were directly linked to its exportpush development strategy. Right from the early 1980s, one of the conditions for foreign firms to invest in China was that they had to sell a large proportion of their outputs to the international market.…”

Processing Trade Biases the Measurement of Vertical Specialization in China

“…Western and Japanese investors primarily have a market-orientation, targeting to sell more products in the Chinese market. The investors from Hong Kong, Macao and Taiwan (in the Chinese literature and statistics indicated as overseas China, versus mainland China) mainly have an export-orientation, considering mainland China as a low-cost production base and export-platform (Xu and Tan, 2003;Buckley and Meng, 2005). 9 For example, both the other production of FIEs and the production of non-processing exports depend to a considerable extent on imported intermediates.…”

Foreign direct investment and gendered wages in urban China

“…NIEs account for 61 percent of FDI stock in China during this period. 5 Although industry-level data on foreign-invested enterprises (FIEs) by source country is difficult to come by, individual studies show that industrialized country investors are geared towards larger, more capital-or technologyintensive ventures and are also more likely to target China's domestic market (Chunlai Chen 1997;John Henley, Colin Kirkpatrick, and Georgina Wilde 1999;Bohm Park and Keun Lee 2003;Peter Buckley and Chen Meng 2005). In contrast, a number of studies indicate that FDI sourced from NIEs tends to be concentrated in smaller, labor-intensive export-oriented manufacturing firms (Chen 1997;World Bank 1997;Park and Lee 2003;Buckley and Meng 2005).…”