The outbreak of the international financial crisis shows that economic globalization has not only brought a lot of instability and uncertainty, it also provided rare opportunities for China's development.
Now is the opportune time for China to accelerate its "going abroad" strategy and expand foreign direct investment to take advantage of the opportunity to establish a new structure for its diversified assets portfolio. This would include the simultaneous development of domestic and foreign assets, physical and virtual assets, as well as upstream and downstream assets.
As to how to "go abroad," it is believed that under the current international economic situation, China's going abroad should mainly focus on the following aspects:
Firstly, it should set up overseas research and development (R&D) centers or design centers in order to make use of internationally advanced technologies, management practices and specialized professionals.
Currently, globalization in the areas of R&D mainly takes place between the US, Japan and the EU, and is not complete globalization. One of the features of R&D globalization is that only R&D projects with a low degree of science and technology are likely to reach a high degree of globalization.
This means that the majority of core technological advantages owned by countries and regions like the US, Japan and the EU are localized rather than globalized. In light of this situation, Chinese enterprises have started to invest in the setup of R&D centers or design centers in these countries.
Secondly, China should invest in and develop natural resource projects abroad that can address its lack of resources.
In recent years, Chinese enterprises have been accelerating steps to make use of both domestic and international resources on a mutual benefit and win-win basis. Not only have large-sized state-owned enterprises and joint-stock enterprises initiated investments in resource development projects in Africa, some small and medium-sized private enterprises have also started to engage in high-risk investment projects, including early-stage mineral explorations in regions such as Southeast Asia, Africa and Latin America.
This type of South-South cooperation and investment mode, involves infrastructure, social programs and comprehensive development of mineral resources, and is favorable to advancing the development of local economies, as well as to promoting the diversification of Chinese enterprises "going abroad" in terms of participating entities and means.
Thirdly, investment can boost the exports of domestic technologies, products, equipment, and labor services.
At present, the pace of Chinese enterprises "going global" has been noticeably accelerated. On one hand, activities carried out by countries and regions such as Japan, South Korea and Europe in attracting investments in China are increasing, which has created a favorable environment for Chinese enterprises to directly invest in foreign countries.
On the other hand, the economic and trade cooperation zones established by China, which are led by large-scale enterprises and could encourage small enterprises to directly invest in foreign countries, are also on the rise.
The free trade agreements, signed between China and other countries or regions such as the ASEAN, Chile and New Zealand, are also beneficial to Chinese enterprises, especially small and medium-sized enterprises going abroad.
Fourthly, outward direct investment with the aim of expanding international markets should be developed.
Haier is one of the pioneer enterprises in this area. Its goal is to develop locally mainstream products in the US, Japan and South Korea over the long term, establishing local marketing channels and fostering a global brand with roots in local markets.
Although outward direct investment strategies involve large amounts of investment, long term commitment and high risk, Haier, through many years of effort, is becoming one of only a few Chinese international brands, as well as being a local brand in the US, Japanese and South Korean markets.
Chinese enterprises' export markets and distribution channels have been greatly damaged by the impact of the current international financial crisis, and the enterprises have a deeper understanding that "distribution channel is king." For example, the purchase price for fruits, which were produced by farmers in Shaanxi Province as raw material for processed fruit juice, was around 0.8 yuan per 500 grams in 2007, but has dropped to 0.08 yuan per 500 grams in 2008.
One of the reasons for such change is the lack of international fruit juice distribution channels. Once large foreign clients drastically cut the volume of their purchases, fruit farmers' incomes plummet accordingly.
This demands that China's overseas economic and trade cooperation zone, which currently includes processing, assembly and manufacturing, is extended to include overseas distribution.
Chinese foreign trade companies should expand their business scope, developing from companies that only engage in foreign trade, to general trading and global supply chain management companies, so as to ensure their export earnings and export market diversification.
By People's Daily Online and the chief economist under the National Development and Reform Commission (NDRC)
|
Comment
Tell A Friend
Print Format
Save Article