Outward Foreign Direct Investment by Chinese Firms: Institutional Theory and Resource Dependence Perspectives

The recent trend in large-scale movement of outward foreign direct investment (OFDI) by emerging economies has attracted considerable attention in the International Business (IB) literature. Chinese firms’ OFDI has received perhaps the greatest attention. This development can be viewed in three stages. During the first stage (1978–1991), which began after the Chinese government’s initiation of its open-door policy, OFDI began to be conducted largely by state-owned enterprises (SOEs) and was subject to strong regulations and scarce capital resources. The amount invested was modest and ranged from a low of US$39 million in 1981 to a high of US$5 billion in 1991 (UNCTAD, 2010). The second stage (1992–2002) saw an increase in OFDI stock value that reached US$37.1 billion at the end of 2002 (UNCTAD, 2010). This occurred due to changes in the domestic political environment and the adoption of the ‘Go Global’ policy by the Chinese government (Zhang and Filippov, 2009). In the third stage (2003 to the present), China experienced a sharp rise in both the growth rate and the absolute volume of its OFDI spreading to the world. While China’s ODFI accounts for less than 1 per cent of the total OFDI stocks in the world (although it rose from US$28 billion in 2000 to US$230 billion in 2009) and lags far behind the world average in terms of its ratio to GDP, the spectacular speed at which it is unfolding is noteworthy and deserves greater research attention (Zhang and Filippov, 2009).