The Role of China in the Global Strategy of Multinational Enterprises

Abstract

This paper moves from the general to the particular. First, it examines the differential speed of globalization in different types of market – specifically markets in finance, goods and services, and finally labour markets. It then analyses the location and ownership strategies of multinational enterprises (MNEs), both as regards individual national markets and then in terms of the interaction between national markets (the ‘local/global’ spectrum). This analytical framework is applied to the place of China in the global strategy of MNEs. This application illuminates the role of DFI (direct foreign investment) in China and illustrates the peculiarities of China's place in the global system. The distortions in China's domestic system interact with the global strategies of MNEs to produce several interesting results, including: (1) the importance of MNEs’ ownership strategy; (2) non-optimal location decisions; (3) the ‘excessive internalization’ of activities in China; and (4) the growing importance of China as a location for DFI and, in future, the potential for growth of outward DFI from China.

Keywords:

• China
• multinational enterprises
• globalisation
• direct foreign investment

Acknowledgements

This paper draws on previous research with Mark Casson, Jeremy Clegg, Adam Cross, Chengqi Wang and Hui Tan. It has benefited from comments from a seminar at Copenhagen Business School (22 January 2003). Mistakes are the sole responsibility of the author.