Outward FDIs by Chinese Companies: Motivations and Implications under Chinese Industry Environment

Economy in China is developing with very fast paces. It is recognized as a fastest-growing major nation for the past quarter of a century with an average annual GDP growth rate above 10%. Some economist predicted that if this rate of Chinese economic growth continues, sooner or later, China will surpass the U.S. and become the world largest economy. With the development of Chinese economic and political system, and the saturation market in developed countries, China has become popular target market all over the world. When more and more foreign companies rushed into Chinese market, Chinese government and companies started to realize that they need to take some actions to survive in this competitive global market. Since 2001, China officially joint World Trading Organization (WTO), the outward Foreign Direct Investment (FDI) has increased dramatically. Especially, there are some Mergers and Acquisitions (M&A) deals attracted a lot of attentions. Although there are some researches about the motivations behind outward FDI, few are put the motivations into Chinese scenario. In my literature review Chapter, Cai (1999) and Deng (2004) will be used as a guideline to conduct my primary direction to analysis the motivations of Chinese outward FDIs. Based on PEST model, industry environment will also be analyzed, combined with current situation in China. By arguing the major motivations of outward FDIs in China, in order to increase the explanatory power of this theories framework, multiple-case study method will be adopted to explain each particular motivation of outward FDIs. Four leading Chinese companies will be introduced –Lenovo, Nanjing Automobile, Sinochem and CNOOC, which will make my points more convincible. Based on the cases study, the mainly motivations of Chinese outward FDIs will be summarised. This study is not only to analyze the theory of outward FDI in China, but also to draw implications to other emerging market companies.