Developing country FDI and development: the case of the Chinese FDI in the Sudan

This paper examines the development implications of Chinese investment in the Sudan to enable a better understanding of the impact of foreign direct investment (FDI) from developing countries. By examining China’s early investment in the Sudan by the Chinese National Oil Corporation (CNPC) and the consequent cascade effect on the Sudan’s significant economic growth during the decade between 1997 and 2007, this paper highlights how progress was achieved through interaction between Chinese FDI and host institutions. It demonstrates that developing country FDI can make positive contributions to development particularly in developing countries, due not only to its capacity appropriate for developing countries, but also to its strategies and mindset more adaptable to the development needs and institutional environment in the host country. While extant research often emphasizes how institutions make FDI’s impact on host countries differ and how institutions in developing countries should be improved in order to attract FDI, this research indicates that proactive adaptation of strategy by transnational corporations (TNCs) to fit local needs and institutions may be more effective for improving institutions and consequently the development in host countries

Chinese expatriate management in emerging markets: A competitive advantage perspective

Recent research draws attention to the large number of expatriates sent abroad by Chinese multinational corporations (CMNCs), especially to emerging markets. It is generally assumed that their large number, and any competitive advantage this generates, relate predominantly to their low cost, compared to other MNCs’ expatriates and/or locally available labour. Our research uses an integrative perspective drawing on the resource-based view (RBV), international human resource management (IHRM) and “country of origin” literature and extensive case-study research on 27 CMNCs in 12 emerging markets. This reveals that the competitive advantage created by Chinese expatriates is closely related to the use of expatriates at both managerial and operational levels. It is achieved through human resource management that exploits their relatively lower cost, higher productivity and hardship tolerance (compared to host or third country counterparts) and their knowledge/resource reconfiguration capability, through a centralised and collective expatriation management system. These together enhance CMNCs’ competitive advantage through not only offering cost effective and differentiated products but also transferring the reconfiguration knowledge. This study enhances understanding of the competitiveness of emerging market multinationals (EMNCs) by showing how the competencies, combination and management of their expatriates create a distinct source of competitive advantage. It also advances IHRM research on expatriates by investigating their use from a competitive advantage perspective

Remaking the World's Largest Coal Market

China's coal market is now in the midst of a radical restructuring that has the potential to change how coal is produced, traded and consumed both in China and the rest of the world. The restructuring aims to integrate the coal and power sectors at giant "coal-power bases" that combined would churn out more coal annually than all the coal produced in the entire United States. Coal-power integration is now a focal point of the Chinese government's energy policy, driven by the dramatic "coal-power conflict". Coal prices are market-based, but power prices are tightly controlled by the government. This has caused massive losses for Chinese power generators in 2008 and 2010 and triggered government intervention in the coal market with attempts to cap the price of coal. The pervasive conflict between coal and power is now driving the Chinese government to remake these markets. Coal-power base policy aims to establish upwards of 14 major coal-power bases, each producing over 100 mt of coal with consuming industries on-site. The plan envisions that roughly half of China's coal production would be produced at a handful major coal-power base sites that are controlled by key state-owned enterprises (SOEs) and the central government. PESD's new research analyzes China's coal-power base reforms and how they will impact Chinese and global coal markets. Several key findings are: First, the implementation of coal-power bases would enhance central government's control over the coal sector and over coal prices. The government could control coal pricing in a large share of the market and mitigate power sector losses by mandating lower coal transaction prices within integrated SOEs. Using this kind of internal transfer pricing at below market prices for up to half of China's coal would represent a meaningful shift in how coal is priced in China. If a large share of China's coal were transacted in this manner, it might create an unofficial two-tiered pricing structure in the coal market. Second, coal-power base policy would bring about modernization and mechanization of a larger share of China's coal production, in theory bringing larger economies of scale to the sector. While up-front capital investment per ton produced will certainly increase, the marginal cost of coal production should decrease, all other things equal. Third, the massive rebalancing of China's coal market implied by coal-power bases is poised to have important impacts on the globally traded coal market. Since 2009, China's import behavior has become a dominant factor determining the price of globally traded coal. In simple terms, when Chinese domestic prices are higher than global prices, the country imports. The development of coal-power bases could radically alter coal price formation in China and directly impact China's appetite for imports, and therefore has the potential to alter coal price formation globally