Understanding the impacts of Chinese foreign direct investment

Since the adoption of the “go global” strategy in the early 2000s, China’s total outward foreign direct investment (FDI) stock has increased from US$30 billion to US$610 billion in 2014. The Economist estimates that the flow of Chinese outward investment will be US$264 billion in 2017 alone. Although China remains a relatively new player in outward FDI, this rapidly expanding flow of capital represents a host of opportunities and challenges for policy-makers, businesses and researchers.

Professor Gordon Houlden, Director of the China Institute at the University of Alberta, has followed these developments with great interest over the past several years. During his previous career as a senior diplomat, Professor Houlden first became fascinated by the early Chinese economic reform efforts while posted at the Canadian Embassy in Beijing in the 1980s.

“At the time, China was undergoing a period of turbulent change, and I had the opportunity to meet the key reformers of the time, such as Deng Xiaoping,” says Professor Houlden. “Since then I’ve followed, as a student of China, the remarkable modernization of the Chinese economy.”

At the China Institute, researchers have been focused on the study of the economic and political dimensions of contemporary China, including the impacts of its outward investment. One particular challenge has been a paucity of reliable data on the trends and patterns of Chinese investment. 

“China’s capital will be a key component of the economic architecture of the 21st century,” says Professor Houlden. “It needs to be better mapped, so that industry and policy-makers can be properly informed.”

Recently, the Institute launched the China-Canada Investment Tracker, a database of investments in Canadian firms and assets by Chinese-controlled entities. Researchers have gathered and verified details on almost three hundred acquisitions, joint ventures, and equity investments in Canada dating from 1993 and are continuing to update the database. Thus far, they have identified more than US$50 billion of investment from the People’s Republic of China.

Research activities at the China Institute have drawn on the talents of PhD candidates, postdoctoral research fellows, and faculty members at the University of Alberta. As part of its mandate to strengthen academic linkages between Canada and China, the Institute has also hosted many visiting scholars and students from Chinese research and post-secondary institutions, such as the Chinese Academy of Social Sciences, Peking University, Fudan University and Zhejiang University.

Professor Houlden believes that, with the help of the WUN, similar data-gathering initiatives and comparative studies can be undertaken in other countries. Already, the University of Alberta and the University of Sydney, two WUN institutions, have begun discussions on a potential collaboration on this subject. 

“If we are to improve understanding, we have to start with accurate data,” says Professor Houlden.

Another topic of interest to the China Institute is the role of China’s state-owned enterprises (SOEs) in outbound investment. The extent to which these enterprises function comparably to privately-held corporations has generated a considerable amount of debate, particularly in Western countries, attracting academic, governmental, and media interest.

“In Canada, the acquisition of Nexen by China National Offshore Oil Corporation (CNOOC) was the largest investment deal that any Chinese company had undertaken abroad, and it created controversy,” says Professor Houlden. “At the same time, we are seeing indications of an evolving role for SOEs, such as the adoption of many commercially-oriented practices and the diversification of investments beyond traditional sectors like resources and energy. These issues all warrant examination.”

For the past several years, the China Institute has hosted an Annual Forum on Chinese Investment in Canada, where academics, industry leaders, and policy-makers convene to discuss ongoing policy issues related to Chinese investment and SOEs.

With WUN, Professor Houlden looks forward to bringing that discussion to the international stage. 

“WUN has brought us in contact with research centres and scholars around the world, who are studying these issues,” says Professor Houlden. “As the only research institute and think tank in Canada that is focused solely on the study of China, we benefit from being able to collaborate on an international level. We want to break down ‘silos’ where individual researchers are working in isolation, and build a broader understanding. Working with WUN places us in a truly global context, which is where we need to be.”

In April, the WUN Global China Group will host its first China Foreign Direct Investment Symposium on the eve of the WUN Annual General Meeting in Hong Kong, which will allow researchers from WUN and Chinese universities to meet and share information on their work. At the symposium, the Global China Group hopes to launch a multi-university, organized and systematic collaboration on research topics related to Chinese investment.

Read more about the WUN Global China Group.