encouraging informed debate through international trade research
Samsung’s contribution to China through FDI
17 November 2017
Written by: Michael Enright
Samsung has been one of the largest foreign investors in China and has built a China structure that rivals that found in its home country of South Korea. Samsung recognized China’s importance, not just as a production location, but as the location for a wide range of corporate activities, including research and development and a variety of senior management functions. However, the Samsung case also shows that major multinationals will actively and continuously evaluate their FDI options. In particular, Samsung is making investments in Vietnam that will rival its China operations in size. This is perhaps a cautionary tale that major multinationals can find other places if China becomes too expensive, or not as hospitable to foreign companies as other countries. This white paper includes the following key findings:
Samsung has invested extensively in production facilities, research and development, and marketing and sales in China. By 2011, Samsung was estimated to have become the largest foreign investor in China, with 155 subsidiaries and a total investment of USD 12.7 billion.
Samsung has also invested extensively to build capabilities in its own Chinese workforce and has localized the vast majority of key management and research positions in China. In 2014, China was responsible for 25 percent of Samsung Electronics’ total workforce –a total of 60,000 individuals– with the average employee numbers having grown 14 percent per annum since 2010.
Samsung has contributed to the development of China’s electronics manufacturing base by engaging not just in electronics assembly in China, but also in advanced componentry, extensive research and development in China, and bringing much of its most advanced technology to China.
China’s economic reforms have created the world’s most dynamic economy. A major part of China’s economic development has involved foreign companies. This white paper contains an excerpt from a larger project initiated by the Hinrich Foundation and undertaken by Enright, Scott and Associates on the impact of foreign investment and foreign enterprises as a whole on China’s economy. The results of the larger project were published in a book by Michael J. Enright, Developing China: The Remarkable Impact of Foreign Direct Investment (Routledge 2017). Using the tools of economic impact analysis, the author concludes that foreign direct investment (FDI) has contributed 33% to China’s GDP and 27% to its employment in recent years. The book offers a balanced and rigorous view of the full impact of FDI – using China as an example to illuminate the mutually beneficial partnership between investing companies and host economies – and more importantly, serves as an effective toolkit for policymakers and corporations to approach FDI globally. It is available in English and Chinese. Learn more about the book here.