Go global
Encyclopedia
Go Out policy is the People's Republic of China
's current strategy to encourage its enterprises to invest overseas.
Most nations favour actively attracting inward foreign investment
, and would only support outward foreign investment passively. The People's Republic of China, however, attaches importance to both inward and outward foreign investment.
The programs launched so far by the Chinese Government have these goals in mind:
Since the launching of the Going out Strategy, interest in overseas investing by Chinese companies has increased significantly especially among State Owned Enterprises. Statistics indicate that Chinese direct foreign investments rose from US$3 billion in 1991 to US$35 billion in 2003. This trend was underscored in 2007, when Chinese FDI reached US$92 billion. This boost in foreign investment can also be attributed to the Chinese Government
's ability and commitment to create the right environment for foreign investment; and China's huge production capacity, coupled with low labor costs. With a dynamic economy, and a strong business-friendly culture, the outlook for Chinese companies will continue to be positive.
As part of its efforts to restructure state-owned enterprises, the Chinese government has established the SASAC (State-Owned Asset Supervision Administration Commission), which develops China's equity exchange market, while supporting Chinese foreign investments. SASAC's responsibilities include:
The SASAC operates through several equity exchanges such as CBEX (China Beijing Equity Exchange
), which is the largest and most prestigious in terms of trading volume. It is headquartered in the heart of Beijing financial district. Presently, CBEX has established three international platforms in Italy, Japan and the United States of America. The Italian CMEX (China Milan Equity Exchange
), created in 2007, is CBEX's first international partner, operating as a liaison to facilitate the penetration of Chinese companies into the Italian and European markets and of European companies in China. Following the trend of the Go out policy, some of the most prominent Chinese professional institutions are expanding their business on the international markets. King&Wood, the largest Law Firm in China with more than 800 lawyers, has recently opened a branch in Japan and in the US, while Grandall Legal Group
(one of the most prominent Chinese Law Firms, with a staff of more than 600 professionals) through its International Department has established a European hub called the “China-Europe Legal Group” to assist Chinese companies in Europe. Carone & Partners is a member law firm of the “China-Europe Legal Group” in Italy.
People's Republic of China
China , officially the People's Republic of China , is the most populous country in the world, with over 1.3 billion citizens. Located in East Asia, the country covers approximately 9.6 million square kilometres...
's current strategy to encourage its enterprises to invest overseas.
Most nations favour actively attracting inward foreign investment
Inward investment
Inward investment is the injection of money from an external source into a region, in order to purchase capital goods for a branch of a corporation to locate or develop its presence in the region....
, and would only support outward foreign investment passively. The People's Republic of China, however, attaches importance to both inward and outward foreign investment.
Causes
- The People's Republic of China has amassed huge amounts of foreign reserves, thus putting upward pressure on the foreign exchange rateExchange rateIn finance, an exchange rate between two currencies is the rate at which one currency will be exchanged for another. It is also regarded as the value of one country’s currency in terms of another currency...
of renminbiRenminbiThe Renminbi is the official currency of the People's Republic of China . Renminbi is legal tender in mainland China, but not in Hong Kong or Macau. It is issued by the People's Bank of China, the monetary authority of the PRC...
, the Chinese currencyChinese currencyThe Renminbi is the official currency of the People's Republic of China . It is the legal tender in mainland China, but not in Hong Kong and Macau. It is abbreviated as RMB, and the units for the Renminbi are the Yuan , Jiao , and Fen : 1 Yuan = 10 Jiao = 100 Fen. Fen have almost disappeared, so...
. Indeed, there have been much demand from the international community for the PRC to float its currency. In order to deflate that demand, the PRC therefore actively seeks to employ its foreign reserves by acquiring assets overseas. - The PRC is opening up the domestic marketDomestic marketA domestic market is a financial market. Its trades are aimed toward a single market. A domestic market is also referred to as domestic trading...
in mainland ChinaMainland ChinaMainland China, the Chinese mainland or simply the mainland, is a geopolitical term that refers to the area under the jurisdiction of the People's Republic of China . According to the Taipei-based Mainland Affairs Council, the term excludes the PRC Special Administrative Regions of Hong Kong and...
as a result of its open door policyOpen Door PolicyThe Open Door Policy is a concept in foreign affairs, which usually refers to the policy in 1899 allowing multiple Imperial powers access to China, with none of them in control of that country. As a theory, the Open Door Policy originates with British commercial practice, as was reflected in...
, which is further accelerated by its commitments when entering the World Trade OrganizationWorld Trade OrganizationThe World Trade Organization is an organization that intends to supervise and liberalize international trade. The organization officially commenced on January 1, 1995 under the Marrakech Agreement, replacing the General Agreement on Tariffs and Trade , which commenced in 1948...
. Therefore, the PRC can foresee that world class competitors are now competing for business in the Chinese market, and so the PRC is seeking to equip the domestic firms and their management with international experience so that they can take the competition to the home marketsDomestic marketA domestic market is a financial market. Its trades are aimed toward a single market. A domestic market is also referred to as domestic trading...
of the foreign nations and so that they can compete better at mainland China's own domestic market. - It is a matter of national pride that the PRC should have world class enterprises.
History
The Go Out Policy (also referred to as the Going Global Strategy) was an effort initiated in 1999 by the Chinese government to promote Chinese investments abroad. The Government, together with the China Council for the Promotion of International Trade (CCPIT), has introduced several schemes to assist domestic companies in developing a global strategy to exploit opportunities in the expanding local and international markets.The programs launched so far by the Chinese Government have these goals in mind:
- increase Chinese Direct Foreign Investment (FDI)
- pursue product diversificationDiversificationDiversification may refer to:* Diversification involves spreading investments* Diversification is a corporate strategy to increase market penetration...
- improve the level and quality of the projects
- expand financial channels with respect to the national market
- promote brand recognition of Chinese companies in EU and US markets
Since the launching of the Going out Strategy, interest in overseas investing by Chinese companies has increased significantly especially among State Owned Enterprises. Statistics indicate that Chinese direct foreign investments rose from US$3 billion in 1991 to US$35 billion in 2003. This trend was underscored in 2007, when Chinese FDI reached US$92 billion. This boost in foreign investment can also be attributed to the Chinese Government
Government of the People's Republic of China
All power within the government of the People's Republic of China is divided among three bodies: the People's Republic of China, State Council, and the People's Liberation Army . This article is concerned with the formal structure of the state, its departments and their responsibilities...
's ability and commitment to create the right environment for foreign investment; and China's huge production capacity, coupled with low labor costs. With a dynamic economy, and a strong business-friendly culture, the outlook for Chinese companies will continue to be positive.
As part of its efforts to restructure state-owned enterprises, the Chinese government has established the SASAC (State-Owned Asset Supervision Administration Commission), which develops China's equity exchange market, while supporting Chinese foreign investments. SASAC's responsibilities include:
- supervision and evaluation of state-owned enterprises
- oversight of state-owned assets
- recruiting of top executive talent
- drafting of laws, administrative rules and regulations that promote increased development of corporate lawCorporate lawCorporate law is the study of how shareholders, directors, employees, creditors, and other stakeholders such as consumers, the community and the environment interact with one another. Corporate law is a part of a broader companies law...
in China - coordination of local state-owned assets as prescribed by law
The SASAC operates through several equity exchanges such as CBEX (China Beijing Equity Exchange
China Beijing Equity Exchange
China Beijing Equity Exchange is an equity transaction bourse and platform run by the government of Beijing for mergers, acquisitions and restructuring of state-owned enterprises.-Background:...
), which is the largest and most prestigious in terms of trading volume. It is headquartered in the heart of Beijing financial district. Presently, CBEX has established three international platforms in Italy, Japan and the United States of America. The Italian CMEX (China Milan Equity Exchange
China Milan Equity Exchange
CMEX is the first equity exchange platform set up in Europe to help European companies gain access to the ongoing privatization process of Chinese State-owned enterprises...
), created in 2007, is CBEX's first international partner, operating as a liaison to facilitate the penetration of Chinese companies into the Italian and European markets and of European companies in China. Following the trend of the Go out policy, some of the most prominent Chinese professional institutions are expanding their business on the international markets. King&Wood, the largest Law Firm in China with more than 800 lawyers, has recently opened a branch in Japan and in the US, while Grandall Legal Group
Grandall Legal Group
The Grandall Legal Group , the only Chinese law firm accorded with the status of 'legal group' as a pilot project by the Chinese Ministry of Justice, is a leading full-service Chinese corporate and commercial law firm in China...
(one of the most prominent Chinese Law Firms, with a staff of more than 600 professionals) through its International Department has established a European hub called the “China-Europe Legal Group” to assist Chinese companies in Europe. Carone & Partners is a member law firm of the “China-Europe Legal Group” in Italy.
Recent examples of the Go out policy
The following list of M&A transactions performed by Chinese companies overseas are just some of the most notable examples of the successful implementation of the Go out policy:- June 2009: Proposed purchase of HummerHummerHummer was a brand of trucks and SUVs, first marketed in 1992 when AM General began selling a civilian version of the M998 Humvee. In 1998, General Motors purchased the brand name and marketed three vehicles: the original Hummer H1, based on the Humvee; and the H2 and H3 models that were...
by Sichuan Tengzhong Heavy Industrial Machinery CompanySichuan Tengzhong Heavy Industrial Machinery CompanySichuan Tengzhong Heavy Industrial Machinery Company Ltd , usually shortened to ) is based in Chengdu, China. Sichuan Tengzhong is a privately owned company known for making a wide range of road equipment, such as bridge piers, highway construction and maintenance machinery... - February 2009: Chinalco injected $19.5bn cash into the Australian mining company Rio TintoRio Tinto GroupThe Rio Tinto Group is a diversified, British-Australian, multinational mining and resources group with headquarters in London and Melbourne. The company was founded in 1873, when a multinational consortium of investors purchased a mine complex on the Rio Tinto river, in Huelva, Spain from the...
, increasing its stake from 9 per cent to 18 per cent - February 2009: Minmetals unveiled a friendly A$2.6bn ($1.7bn) takeover offer for the Australian Oz Mineral
- September 2008: Zoomlion, controlled by the HunanHunan' is a province of South-Central China, located to the south of the middle reaches of the Yangtze River and south of Lake Dongting...
provincial government, bought a 60% stake in Compagnia Italiana Forme Acciaio, the Italian construction equipment & machinery company, with full takeover possible 3 years later - May 2005: Lenovo bought IBMIBMInternational Business Machines Corporation or IBM is an American multinational technology and consulting corporation headquartered in Armonk, New York, United States. IBM manufactures and sells computer hardware and software, and it offers infrastructure, hosting and consulting services in areas...
's personal computerPersonal computerA personal computer is any general-purpose computer whose size, capabilities, and original sales price make it useful for individuals, and which is intended to be operated directly by an end-user with no intervening computer operator...
division
See also
- Economy of the People's Republic of ChinaEconomy of the People's Republic of ChinaThe People's Republic of China ranks since 2010 as the world's second largest economy after the United States. It has been the world's fastest-growing major economy, with consistent growth rates of around 10% over the past 30 years. China is also the largest exporter and second largest importer of...
- Foreign policy of the People's Republic of China
- SinoLatin CapitalSinoLatin CapitalSinoLatin Capital is a Shanghai based-merchant bank specializing in financial advisory, private equity and research focused exclusively on cross border transactions between China and Latin America. The firm provides advisory services related to mergers and acquisitions, corporate restructurings...