How can we explain the international expansion of Chinese business Essay - 1

How can we explain the international expansion of Chinese business Discuss using a big business group example(s) to illustrate your argument - Essay Example Both push and pull factors have contributed to the international expansion of Chinese business. China opened up its economy in the 1970s and gained accession to World Trading Organization (WTO) in 1990. Because of the locational advantages that China offered, it received huge inward FDI (foreign direct investment) flows since the mid-1990s which has been one of the reasons for outward FDI (OFDI). Inward FDI resulted in massive foreign currency reserves (Andersson and Wang 2011) while the MNCs in China also provided the much-needed technical know-how, competence and confidence to the domestic companies to venture overseas (Bhuiyan 2011). China no longer remained a magnet for inward FDI but now has become a major source of OFDI (Liu and Buck 2009). Most OFDI was directed towards developing nations with geographical or institutional proximity requiring limited resources. The newly industrialized economies (NICs) of East Asia and Japan engaged in OFDI due to push factors (labour shortages, high operating costs) while China initially engaged in OFDI due to pull factors (natural resource endowments and market potential) (Biggeri and Sanfilippo 2009). The motives to internationalize included enhancing the corporate brand values of Chinese enterprises (OECD 2009). However, as the Chinese government tried to integrate China into the world economy (1979-1985) only the state-owned enterprises (SEOs) were granted approval for internationalization. In the next stage the non-SOEs were allowed to expand abroad through a foreign affiliate. OFDI from China remained highly regulated during the first two decades of the economic reform (Liou 2009). As part of the Go Global Policy outlined in China’s 10th five-year plan in 2001, certain industries like textiles, machinery and electrical equipment, were provided with foreign exchange support and export tax rebates to boost internationalization.