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FDI in China 

The Hinrich Foundation is pleased to announce the publication of a new book by Michael J. Enright that analyses the impact on China’s economic development of foreign direct investment. For the first time, using Economic Impact Analysis and econometric modelling, the book estimates that the impact of foreign investment is far larger than is generally understood, and that most multinational companies vastly underestimate their own impact on China’s economy.

About the bookAbout the authorBook materialsUS FDI in ChinaEventsMedia coverage

One of the most important features of China’s economic emergence has been the role of foreign investment and foreign companies. The importance goes well beyond the USD 1.6 trillion in foreign direct investment that China has received since it started opening its economy. Using the tools of economic impact analysis, the author estimates that around one-third of China’s GDP in recent years has been generated by the investments, operations, and supply chains of foreign invested companies. In addition, foreign companies have developed industries, created suppliers and distributors, introduced modern technologies, improved business practices, modernized management training, improved sustainability performance, and helped shape China’s legal and regulatory systems. These impacts have helped China become the world’s second largest economy, its leading exporter, and one of its leading destinations for inward investment.

The book provides a powerful analysis of China’s foreign investment policies that can inform policy makers around the world, while giving foreign companies tools to demonstrate their contributions to host countries and showing the tremendous power of foreign investment to help transform economies.

The book is based on a project commissioned by the Hinrich Foundation and conducted by Enright Scott & Associates. 

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Routledge: 20% discount with web code ‘ASIA230’

外商投资和外商投资企业为中国经济作出了贡献,这是中国经济崛起的一个重要特点。自改革开放以来,中国已经累计吸引了1.6万亿美元的外商直接投资,但这一数据还远不能体现外资和外资企业的重要性。本书作者运用经济影响分析工具对其影响进行了估算:近年来,外商投资企业通过投资、运营和供应链为中国贡献了约三分之一的国内生产总值。此外,外资企业还促进了中国各类产业的发展,为中国培育了供应商和经销商,引入了现代技术,改进了商业做法,推动了中国管理培训的现代化,提高了中国的可持续发展,并帮助完善了中国的法律和监管体系。目前,中国是世界的第二大经济体、主要出口国和外来投资主要目的地之一,这与外资的贡献不无关系。

本书有关中国外资政策的深入分析为世界各国的政策制定者提供了参考,同时也为进行海外投资的公司提供了有力的工具。此外,本书还指出外国投资在促进经济转型中所发挥的作用。

本书由致力于促进全球可持续贸易的韩礼士基金会赞助。

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Michael J.Enright photo

Michael J. Enright, a leading expert on competitiveness, regional economic development, and international business strategy, became the Sun Hung Kai Professor of Business at the University of Hong Kong in 1996 after six years as a professor at the Harvard Business School. He is also a director of Enright, Scott & Associates consultancy and a founder of The Competitiveness Institute. Professor Enright has consulted to companies, governments, and multilateral organizations in more than 30 countries on six continents on international business strategy, competitiveness, regional clustering, technology policy, and economic development; has appeared in 40 countries as a featured speaker; and has authored numerous books and monographs on international competitiveness and China’s development.

米高Ÿ恩莱特(Michael J. Enright)教授是竞争力、区域经济发展和国际商业策略方面的资深专家,曾在哈佛商学院任教六年,自1996年起担任香港大学商学院教授。同时,他还是恩莱特Ÿ司各特咨询公司(Enright,  Scott & Associates)的董事和竞争力研究所(The Competitiveness Institute)的创始人。多年来,恩莱特教授为六大洲30多个国家的企业、政府和多边机构提供专业咨询,涉及国际化运营战略、竞争力、区域集群、技术政策和经济发展等诸多领域。此外,恩莱特教授还作为特邀嘉宾在40多个国家发表过演说,并出版了多部有关国际竞争力和中国发展的书籍及专题著作。

In 2015, Hinrich Foundation engaged Enright, Scott and Associates led by Prof Michael J. Enright to undertake a major research effort to identify the impacts of FDI in China. It is generally acknowledged (although less by China these days) that the economic development of China owes some of its success to the foreign direct investors who developed industries in China over the last 30 years. This project set out to measure the actual impact that FDI has had (and continues to have) on China. The project produced a number of comprehensive research reports which are shared here:

FDI in China literature review

fdi-add-review

There is an extensive academic literature on the impact of foreign investment on China’s economy. This literature differs greatly from work that compiles and reports statistical data on the amounts of foreign direct investment in China. It differs substantially from the individual company stories, anecdotes, and case studies found in the business press. It also differs considerably from the surveys of foreign companies that focus on the opportunities and challenges faced by foreign firms operating in China. This literature is important in that it tends to shape much of the discussion and debate about foreign investment that goes on in policy circles in China and in influential think tanks around the world. In addition, a number of the people who write in this area are likely to be called upon by government as advisors. Thus it is crucial for anyone interested in the impact of FDI in China, or interested in the types of analysis and discussion that can influence policy toward foreign investment behind the scenes in China, to understand this literature. It is also vitally important that foreign governments, think tanks, and companies that are interested in China or operate in China understand this literature in order to understand Chinese approaches and policies toward foreign direct investment and how these might evolve in the future.

Download full report

FDI in China policy summary

FDI policy summary

This document briefly summarizes the evolution of China’s policies toward foreign investment into the country. It then traces the history of inward investment into China by compiling a variety of statistics concerning foreign direct investment in China, the importance of foreign investment to capital formation and trade in China, and breakdowns of foreign direct investment in China by origin, industry, province, and city. The document then reports a unique analysis of the impact of foreign investment on China’s economy, and end with a set of conclusions summarizing the earlier sections of the document.

Download full report

FDI in China Economic results

Econometric results

In this document, we undertake a series of econometric tests of the influence of foreign investment on various aspects of China’s economy. The goal is two-fold. First, to perform similar tests as have been found in the academic literature on the impact of foreign direct investment in China in order to see if those results stand up to changes in the variables employed, the specific formulations used, and the time periods studied, or whether the published results are in some ways dependent on the specifics of the variables employed, formulations used, and time periods studied. Second, we test our own formulations of relationships between foreign investment and key aspects of China’s economy in order to add perspectives to the existing literature. The main reasons for these approaches is that the econometric literature on the impact of FDI in China can be influential in terms of policy making within China, and that there are some contradictory and counter-intuitive results in the existing literature that have been described in the literature review for another Phase of the current project.

Download full report
 
Corporate case study: Hong Kong Pioneers
HK Pioneers case study

Corporate case studies provide a range of insights into the roles played by foreign companies in China. The following case study is an excerpt from “Developing China: The Remarkable Impact of Foreign Direct Investment”. It details the contribution of Hong Kong companies to China through FDI, and shows how these companies have been pioneers in many if not most aspects of China’s economic opening. The case study includes the following key findings:

  • Hong Kong has been the largest single source of foreign investment into the Chinese Mainland. From 1985 to 2014, Hong Kong was the source of USD 744.8 billion in foreign direct investment, or 47 percent of all of the FDI into the Chinese Mainland, according to Chinese statistics.
  • Hong Kong companies have been pioneers in many aspects of China’s development and particularly its interaction with the rest of the world. Hong Kong companies helped develop the supply chains and production systems that made China one of the world’s leading manufacturing and export locations. They were also early investors in the infrastructure that helped link China to the global economy.
  • While the relative importance of Hong Kong investors has diminished over the years, they still make vital contributions to China.
Download case study
 
Corporate case study: Maersk
Maersk case study

Corporate case studies provide a range of insights into the roles played by foreign companies in China. The following case study is an excerpt from “Developing China: The Remarkable Impact of Foreign Direct Investment”. The Maersk case shows how valuable it has been for China to connect to world markets and how extensive the resulting impact of the foreign companies that facilitate this process can be. The case study includes the following key findings:

  • Through its investments in ports and its shipping operations, Maersk has been a leader in connecting China to the rest of the world and in facilitating China’s emergence as the world’s leading trading nation.
  • The total cumulative impact of Maersk’s direct investment (including the direct, indirect, and induced impacts) is estimated at USD 21.5 billion in output, USD 6.7 billion in value added and over 991,000 in employment. The impact of its procurement is estimated at USD 25.8 billion in output, USD 7.9 billion in value added and 1.125 million in employment.
  • Beyond the numbers, Maersk has also contributed to China by assisting Chinese suppliers, improving efficiency in ports and logistics, reducing costs, and improving environmental practices.
Download case study
 
Corporate case study: Procter & Gamble
P&G case study

Corporate case studies provide a range of insights into the roles played by foreign companies in China. The following case study is an excerpt from “Developing China: The Remarkable Impact of Foreign Direct Investment”. It describes P&G’s 30-year contribution to China through FDI. The case study includes the following key findings:

  • The impact of P&G’s investments and operations on China’s economy has been several times its investment and sales totals.
  • In 2014 alone, the impact from the P&G system of retailers and distributors in China can be estimated to have reached USD 11.28 billion in value added and over 612,000 in employment.
  • Beyond the numbers, P&G has also contributed to China by introducing new product categories, building supply chains and distribution channels, advancing marketing and advertising capabilities, developing corporate social responsibility programs and training generations of Chinese staff and executives.
Download case study
 
Corporate case study: Samsung

Corporate case studies provide a range of insights into the roles played by foreign companies in China. The following case study is an excerpt from “Developing China: The Remarkable Impact of Foreign Direct Investment”. It describes Samsung’s contribution to China through FDI. The case study includes the following key findings:

  • Samsung has been one of the largest foreign investors in China. It has invested extensively in production facilities, research and development, and marketing and sales in China.
  • 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 electronic 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.
Download case study
 
FDI in China Infographic
FDI-in-China

This four-page infographic highlights a number of the key data points from “Developing China: The Remarkable Impact of Foreign Direct Investment”, including FDI impact on China’s GDP and employment, as well as some of China’s major cities and industries. It also describes key benefits of foreign investment that are often difficult to quantify. The infographic is now available in English and Chinese.

Download English infographic


Download Chinese infographic

FDI in China Fact sheet

FDI fact sheet

This one-page fact sheet provides a brief overview of the key findings from “Developing China: The Remarkable Impact of Foreign Direct Investment”. It explains the economic impact of foreign investment on China’s economy and describes the specific result of foreign investment on individual Chinese cities. The fact sheet is now available in English and Chinese. 

Download English fact sheet  


Download Chinese fact sheet

In addition to the book “Developing China: The Remarkable Impact of Foreign Direct Investment,” the Hinrich Foundation commissioned a multi-month investigation of the impact of US foreign investment and US companies on China’s economy.  The investigation resulted in a white paper report titled “The Impact of U.S. Foreign Investment and U.S. Companies on China’s Economy” by Michael J. Enright. The new data uncovered in this ground-breaking research suggests the economic impact of US FDI in China may be far greater than previously estimated.

White paper report

White paper report

China’s economic reforms have created the world’s most dynamic economy. A major part of China’s economic development has involved foreign companies, and in particular companies from the United States. This white paper summarizes the results of a project sponsored by the Hinrich Foundation and undertaken by Enright, Scott and Associates (ESA) on the impact of US investment and US companies on China’s economic growth and employment.

Among the papers conclusions:

  • Official US Foreign Direct Investment (USFDI) numbers are likely to be substantially understated because they do not capture all investments made through third countries or economies.
  • Economic impact analysis gives a much more complete picture of the benefits of foreign enterprises than foreign direct investment (FDI) flows. The economic impact of US Foreign Affiliates (USFAs) in China in a given year has been as much as 180 times the investment flow. This is where the discussion about the impact of US companies in China should start, with the economic impact estimates, not with the USFDI figures.
  • China benefits far more than US companies from their presence in China, since the GDP impact of US companies, suppliers, distributors, and the relevant employees in China in a given year is on the order of 11 times their net income.
  • The economic impact analysis tools can be used in other countries to provide a more complete picture of the benefits of FDI and foreign companies.

Download white paper report

Expanded white paper report

White paper report

The expanded version of the above white paper report contains more historical context and statistical information. It provides an overview of the evolution of US direct investment in China, including insight into initial US-China commercial interactions and US foreign investment in the New China. It also describes in detail the methodology behind the economic impact analysis used for this report. Finally, the expanded white paper report provides a number of additional charts and graphs illustrating the impact of US foreign direct investment on China’s economy over the years.

Download expanded white paper report

 

US FDI in China Fact sheet

White paper fact sheet

This one-page fact sheet combines key findings from the white paper report on US FDI in China with key findings from “Developing China: The Remarkable Impact of Foreign Direct Investment”. It includes data on FDI inflows and the economic impact of foreign investment on China’s GDP and employment. It also describes additional impacts of foreign investment that are often difficult to quantify and provides analysis on implications moving forward. 

Download US FDI in China fact sheet

 

 

Chinese-language book launch event in Beijing — July 25, 2017

The Chinese-language edition book launch for Developing China: The Remarkable Impact of Foreign Direct Investment was held in Beijing on July 25, 2017. The book, written by Michael J. Enright, uses China as an example to illuminate the mutually beneficial partnership between investing companies and host economies and offers a balanced and rigorous view of the full impact of foreign direct investment (FDI). The author Michael J. Enright, Hinrich Foundation’s management leadership, as well as representatives from government, enterprises, and the academic field attended the book launch event to share research findings and results highlights.

Click here and read more about the event!

Michael Enright presents new US FDI in China report – July 13, 2017

On July 13, 2017, author Michael J. Enright presented findings from a ground-breaking new white paper report on the impact of US foreign direct investment (FDI) and US companies on China’s economy. The event was held by the American Chamber of Commerce in Hong Kong and attended by members across the government, business and academic sectors.

Click here to read more about the event!

Book launch event in Hong Kong – Nov. 15, 2016

The Hinrich Foundation presented its new book “Developing China: The Remarkable Impact of Foreign Direct Investment” by Michael J. Enright on Tuesday, November 15th at a luncheon event in Hong Kong. Influential members from across the community gathered to celebrate the Hong Kong launch of the book, including Consul Generals, government representatives, business leaders and the academic community.

Click here to read more about the event!

Book launch event in Washington D.C. – Sept. 27, 2016

The Hinrich Foundation launched its new book “Developing China: The Remarkable Impact of Foreign Direct Investment” by Michael J. Enright on Tuesday, September 27th at the Center for Strategic and International Studies (CSIS) headquarters in Washington, D.C.

Click here  to read more about the event!

Book talk at Harvard University – Sept. 19, 2016

On September 19th, Professor Michael Enright presented findings from “Developing China: The Remarkable Impact of Foreign Direct Investment” at Harvard University. The event was hosted by the Ash Center for Democratic Governance and Innovation and co-sponsored by the Harvard University Fairbank Center for Chinese Studies. It was moderated by Dr. William H. Overholt, Asia Center Fellow at Harvard University.

 


 

Karl Sauvant

“This volume describes the step-by-step process through which China opened its economy to foreign direct investment and how this investment has helped transform the economy. Using a novel combination of economic impact analysis, econometric analysis, city case studies, and corporate case studies, Professor Enright shows the massive impact that foreign direct investment has had, and continues to have, on China’s economy. This book should prove extremely useful for policy makers focused on inward investment, as well as companies wishing to make the case for their impact on host economies.”

Karl Sauvant, Resident Senior Fellow, Columbia Center on Sustainable Investment; former Director, UNCTAD Investment Division

Nicholas Lardy

“Developing China is the most comprehensive study of the role of foreign invested enterprises in China’s economic transformation available. It analyzes the evolution of government policy toward foreign investment and, more importantly, provides a path breaking analysis of the contribution of foreign firms to the growth of output and employment in China.”

Nicholas Lardy, Anthony M. Solomon Senior Fellow at the Peterson Institute for International Economics

 

Scott Kennedy

“Michael Enright forcefully assembles mountains of quantitative data and well chosen case studies to demonstrate how critical foreign investment and mulitnational companies have been to China’s meteoric rise over the past four decades. From Shanghai to Sichuan, from technology innovation to public policy to corporate social responsibility, the fingerprints of foreign businesses are everywhere. Scholars, business strategists, and policymakers interested in China’s economic transformation and the powerful role multinationals play around the world should read this book.”

Scott Kennedy, Director of the Project on Chinese Business and Political Economy, Center for Strategic and International Studies

“改革开放以来,中国经济发展取得了巨大成就,外商直接投资在其中功不可没,对此国内外已有大量论述。恩莱特教授以科学系统的研究方法,首次运用经济影响分析工具,配合企业案例和典型城市分析,以及对既有文献研究的数据扩展和模型修正,对中国利用外资的成就和外资对中国经济发展的贡献做出了积极正面的评价。正如书中所说,外资对中国经济的影响存在地域差异和时间段差异,过去、现在和未来,外资对中国经济都有着重要意义。总结过去,才能更好地面向未来,当前中国正在全面深化改革,扩大对外开放,利用外资进入新的发展时期。本书中文版值此之际出版,更值得官产学各界研读和思考.” 

李钢,商务部国际贸易经济合作研究院副院长

Li Gang, Vice President, Chinese Academy of International Trade and Economic Cooperation, MOFCOM

 

“1984年到2015年,将中国各年度实际利用外资金额进行简单累计,就已达到1.64万亿美元。如果精确一些,考虑购买力水平,并且以2015年美元不变价来衡量,则累计吸引外资已经达到2.66万亿美元。资本是逐利的,中国如何吸引到这么多的外资?除了资金本身,外商直接投资还给急切盼望发展的中国带来了什么?与此同时,外商投资带来了哪些问题?今天的中国是否还需要继续吸引外资?凭借在哈佛商学院6年的远观,以及在香港大学20年的近察,Michael Enright教授试图使用大量冰冷的数据、以及真实生动的故事,对上述问题给出了他的回答.” 

徐奇渊,中国社会科学院世界经济与政治研究所副研究员

Xu Jiyuan, Director, Economic Development Division of the Institute of World Economics and Politics, Chinese Academy of Social Sciences

 

“改革开放三十多年来,中国经济能够取得今天的成就,有一种“暗物质”作用巨大,那就是外资。改革开放之初,外资是中国经济接入世界的“插口”,在中国与世界之间建立桥梁;建设市场经济的过程中,外资是连接中国与世界的“路由器”,为彼此找到通路;而今,中国经济也在走向世界,外资与中国经济正在深度融合,彼此互联。随着中国经济与外资之间的“链路”越来越复杂,一本好的“指南”对中外企业都愈显珍贵。这本书正是这样一本指南.” 

贾晋京, 中国人民大学重阳金融研究院首席研究员 

Jia Jinjing, Director, Macro Research Department at Chongyang Institute for Financial Studies, Renmin University of China