Upload
uttara
View
42
Download
0
Tags:
Embed Size (px)
DESCRIPTION
The Development of Chinese Multinationals. By Dr. TSENG C.S. Department of Marketing City University of Hong Kong. Rapid Economic Growth. China ranks first as a global destination for FDI. Ministry of Commerce:. Up to the end of 2003. - PowerPoint PPT Presentation
Citation preview
The Development of Chinese Multinationals
ByDr. TSENG C.S.
Department of Marketing City University of Hong Kong
Rapid Economic Growth
China ranks first as a global destination for FDI
Ministry of Commerce:Up to the end of 2003
PRC set up more than 7400 enterprises in 160 countries
Cumulative contracted investment US$ 33.2 billionUNCTAD
FDI outflow from China: US$2.4 billion yearly (1990 - 1994)
Much higher than that of MOFTEC
Many Chinese enterprises invest overseas without seeking approval
UNCTAD forecasts (2004) China mainland is expected to become the fifth largest investor after US, Germany, Britain and France
UK attract FDI from ChinaBritish investment held seminar, talks, exhibitions in:
Beijing Shanghai
GuangzhouTo convey:
Government policyOpportunities
Tax incentiveEstimated:
Up to 10 billion pounds to UK within next five years
100,000 jobs
Historical development of PRC outward direct investment
Stage I Only state owned import and export corporation
Provincial and municipal economic and technological cooperation enterprises under the commission of foreign economic relation and trade
Were eligible to invest overseas
Macro PerspectiveMacro Perspective
185 non-trading enterprises
Mostly JV
Contracted investment US$249 million
Share of Chinese US$ 149 million
Mostly developing countries
Restaurants, engineering, finance/ insurance
MOFERT: Legal entity
Sufficient capital
Technical and operation know-how
Suitable partner overseas
577 PRC enterprises were set up
Contracted investment US$2.3 billion
PRC firm US$1 billion
Stage II
(1985 - 1990)
Spread more than 90 countries
United States
Thailand
Australia
USSR
Many of them are developed countries
Business:Metallugry/minerals, petro-chemicals, electronic/light industry, transportation, finance/ insurance, medical and tourism
Parent: include manufacturing
Emergence of large transnational corporations
1. China National Metals and Minerals Import and Export Corporation
49 companies, JV and representative offices in 23 countries and regions (1989 figures)
2. China National Chemical Import and Export Corporation (Sinochem)
62 overseas subsidiaries in Asia, Europe, United States and Australia
1991 Chinese economy pick up drastic increase in terms of both the number and amount of investment
207 overseas, non-trading subsidiaries
Total contracted investment
PRC contributed
US$759 million
US$367 million
1992 305 non-trading overseas enterprises were set up
Total contracted investment US$352 million
PRC firms contributed US$195 million
Various seminars being organized
Yuan MuLi Peng
(1991 - 1999)Stage III
1992 Deng’s Southern visit
Call for faster and further development of export oriented economy
Especially in SEZ
Foshan
Director of foreign trade commission
Encourage enterprises to set up manufacturing bases overseas to avoid discriminatory measuresMayor of Shenzhen
Asked 80 plus overseas enterprises to meet new target of performance
Other provinces and municipalities
LiaoningHubei
XiamenExpressed their intention to increase their FDI further
14th National Congress
Jiang Zemin
Open the country wider
Make more and better use of foreign funds, resources technology and management expertise
Encourage enterprises to expand their investment abroad and their transnational operation
1992 Turning point
Macro economic control
Stop approval - avoid loss of state asset
( 1998 onwards)Stage IVEncourage enterprises to set up
oversees processing plant incentives
Market entry behavior of PRC multinationalsMarket entry behavior of PRC multinationals
Most of the PRC investors are unlikely to consider alternative countries in FDI decision making process
Majority of PRC overseas enterprises are relatively small in size in terms of initial capital outlay with few exceptionsIn order to reduce capital risk, most of the PRC oversea enterprises are in the form of JV
Ethnic and culture ties play a very important role
Mainly Greenfield investment complemented by acquisitions
Classiification of Chinese Multinationals(Hai Yan Zhang and Daniel Van Den Bulcke)
1. Foreign Trade Corporations (FTCs)
2. Foreign Business Oriented Companies or Conglomerates (FBOC)
E.g. C I T I C
Yue Xiu (Guangzhou Municipal Government)
3. Large industrial corporations(LICs)
4. Small and medium sized firms (SMEs)Including township enterprises
Micro PerspectiveMicro Perspective
1. FTCs1. FTCsBefore 1980
Monopolized foreign trade
Single product
Mono-function
1984
Gradual decentralization
FTCs lost monopolized status in foreign trade
Survival
Vertical integration Production
Multi-functions Finance, transport, insurance
Model: Japanese Sogo ShoshaKorean Choebol
E.g. SinochemEstablished 1950
19 Dec 1987: State council Document 78 approved Sinochem as trial enterprise ( 試點 ) for transnational operations
San-zhuan-san-hua 三轉三化(a) Import and export trade to international trade:(a) Import and export trade to international trade:
Future trade, entrepot business of crude oil, barter trade of petroleum
(b) From single commodity trade to multi-(b) From single commodity trade to multi-functionalfunctional operationoperation
-- production, transportation, finance, service, consultancy, information, insurance, high technology, tourism
(c) From trading to multinational enterprises(c) From trading to multinational enterprises
In 1989In 1989
62 overseas enterprises in Asia, Europe, United States, and Australia
Overseas sales: US$3.7 billion
Overseas production value25% of total value
19941994
Approved by state council as multinational conglomerates based on Sogo Shosha Model
1. Sinochem finance company-- China Trust and Investment Corp for Foreign Economic Relation and Trade (Transferred from MOFTEC)Include Zhong Hong Life Insurance
Joint Venture with Manulife
2. Cross share holding with China Petrochemical Crop
-- Sinopec and China National Petrochemical Crop
The first of Chinese 500 largest foreign trade firms since 1988
RRanked 304th in Fortune 500 (1998)
1414th world trading house
TTurnover US$13.8 billion
PProfit US$67.63 million
TTotal asset US$ 4.957 billion
2nd Trial enterprise2nd Trial enterprise
Orient International
Set up in Nov 1994
Merger of five “Golden Flowers”(five FTCs under Shanghai Municipal Government)
SilkSilk
GarmentGarment
Textile Textile
KnitwearKnitwear
Home textileHome textile
Ranked 7th in the 500 FTCs in China
March 1997
Approved as 2nd trial enterprise
Core business-- Import and export trade
-- multifunction conglomerate: production, finance, technology, service, information
Corporate headquarter: Centralized decision makingCentralized decision making
Centralized financeCentralized finance
Centralized managementCentralized management
High value added product
Diversified product: Light industrial product, electrical instrument, specialty chemicals and biological product
Under Shanghai Government directive
Merger of Shanghai Silk Industrial Company and Silk Import and Export Company
Orient International: 80% equity
Shanghai Textile Holding: 20% equity
Shareholder of security company
Pudong Development Bank
Set up overseas enterprise division
Better coordination
Re-organized companies in
JapanAmerica
Hong Kong
2. FBOC2. FBOCCITIC
Yue Xiu
Guangdong Enterprises
Other provincial and municipal investment trust
Partner with industrial companies to invest overseas
Portfolio investment
CITIC
CITIC hunting abroad for natural resources, capital, technology to boost economic development at home
A consortium led by CITIC pacific
Acquired giant Hong Kong trading house
CITIC Hang Chong investment co. for 6.94 billion Hong
Kong dollars ( US $894.4 million) in early 1990. [ Wall Street Journal eastern edition New York
Sept 4, 1991 A9)
CITIC Australia major investment 10% stake in an aluminum smelter known as Portland
[ Asian Wall Street Journal April 20, 1993]
Acquired Naracoorte meatworks from Smorgon Meat group in 1995 . Made CITIC Australia the second largest exporter in Australia
3. LICs3. LICsCapital Iron and steel
Zhou GuanwuZhou Beifang
July 1988 Purchased 70% of the share of the Mesta Engineering Company in Pittsburgh for US$3.4 million
Oct 1992 Shougang spent US$20 million to purchase 51% of the total share of Tung Wing Steel and Iron Ltd
(Changed name to Shougang Concord in July 1993)
Feb 1993
Bought 25.12% interest in Eastern Century Holdings by 1993 controlled six listed companies:
Shougang Concord, Shougang Grand, Santai Manufacturing, Eastern Century, Paul Y - ITC, and Hoi Shing
Oct 1992 US$15 million purchase the second steel converter of the California Iron Industry Company
Nov 1992 Shougang paid US$120 million to purchase Hierrs Iron Mine in Peru
By 1998 Shougang had 15 overseas enterprise and offices in 11 countries and regions
AmericaEurope
Southeast AsiaHong Kong
Middle East
Common wealth of the independent states
Accumulated investment US$13.2 billion
Qingdao
Plants in Philippines, Indonesia and Malaysia
Invest US$30 million in a factory in South Carolina to produce refrigerators
Aim to be listed in Fortune 500
HaierHaier
4. SMEs 4. SMEs KelonGalanzHuawei
Originally township enterprises
Listed in Hong Kong Stock Exchange
Merger with Huabao in August 1998 further solidified Kelon’s leading position
Global strategy
Moved headquarter to Hong Kong
In July 1996
Invested 1.1 billion Japanese Yen in Japan to establish Japan Kelon Co. (electronic appliances research and development)
Chosen by Forbes in 1999 as one of the world’s 300 best small companies
KelonKelon
GalanzGalanz78 Established in 1978
80s Garment factory
Microwave oven93
Opportunities
Korean and US (Whirpool) companies make acquisition capture their markets
98 Enter the Europe market
World largest microwave oven producer
Marketing companies in US, Canada and South America
Dec 98 Set up R&D lab in Silicon Valley
HuaweiHuaweiPrivate enterprises
One of the largest in China
After 2000After 2000, particularly after China joining
WTO Behavior changes More and more activities in outbound M&A
1.FTC
2.FBOC
3.LICs
4.SME
1. FTC
Sinochem In 2002, Acquired Middle East oil and gas
exploration and production unit Atlantis from Petroleum Geo-Services (PGS), A Norwegian oil service company
In Dec 2003, Sinochem paid US $100 million to buy a stake in an Ecuadorian oilfield
2nd Acquisition of oversea oil and gas reserves
2. FBOC
Many FBOCs encounter problems during late
90s
3. LICs
CNOOC purchased Repsol-YPF SAS interest in five Indonesian oil and gas properties for $ 585 million in 2002
Petrochina Early 2003 bought six concessions from US-based
Devon for $262 million June 2003 headed a consortium bought 30% stake
in Jabung production-sharing contract (PSC) for $164 million
3 LICs
Huaneng power group In Dec 2003, Dollars 227m purchased of
50% share in Ozgen in Australia, a subsidiary of Intergen, the Boston-based power company.
It can gain experience and access to management and technology
3 LICsHaierIn June 2001
Haier Purchased a refrigerator manufacturer in Vicenza Italy
1st Chinese enterprise purchasing factory in the European household appliance manufacturing center
3 LICsHaier
Haier not only acquire a white home appliances production base in Europe possess the condition for participation in local manufacturers’ organizations and acquiring information
Paving the way for achieving the goal of creating world name-brands by making use of local funds, intellectual resources and culture
Favorable geographic location famous manufacturers whirlpool, Candy and Zanussi
3 LICs
TCL
Purchased German Electronics Giant Schneider in Sept 2002
Merged with Thomson in Nov 4 2003 One of the biggest TV manufacturers in
the world after the merger
3 LICsShanghai Electric GroupAcquired Japanese printing machine manufacture, Akiyama Machinery Manufacturing Corporation in 2002Shanghai Soap GroupPurchased of battery production plants from American corporations multitech and PolystorDalian Machine Tool groupAcquired the production machine Division of American Ingersoll milling machine co. in late 2002SAICAcquired South Korea Ssangyong Motor CompanyLenovoAcquired PC units of IBM in Late 2004
4. SME
In early 2003, Holley Communication Group Inc, a Delaware company, wholly owned subsidiary of China’s Holley group Ltd
Acquired Philips Semiconductors’ CDMA handset reference design operation with offices located in Vancouver BC Canada, and Dallas, Texas USA
CEO’s Wang Licheng