Globalisation has ushered in a new phenomenon on which experts have been focusing: the internationalisation of firms from emerging countries such as China. Still limited in number and invested capital, they are penetrating multiple markets, north and south, seeking production factors (raw materials, technologies, human capital) and markets. The accumulation of financial resources and technical as well as managerial knowhow due to industrial cooperation and expansion favours greenfield investm..

Richet, Xavier

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 China Perspectives 
2011/2 | 2011
The Changing World of Chinese Labour
Ilan Alon, Julian Chang, Marc Fetscherin, Christoph
Lattemann and John R. McIntyre (eds.), China Rules
Globalization and Political Transformation
Palgrave, MacMillan, Basingstoke and New York, 2009, xxi + 307 pp.
Xavier Richet
Electronic version
URL: http://journals.openedition.org/chinaperspectives/5588
ISSN: 1996-4617
Publisher
Centre d'étude français sur la Chine contemporaine
Printed version
Date of publication: 30 July 2011
Number of pages: 77-78
ISSN: 2070-3449
 
Electronic reference
Xavier Richet, « Ilan Alon, Julian Chang, Marc Fetscherin, Christoph Lattemann and John R. McIntyre
(eds.), China Rules Globalization and Political Transformation », China Perspectives [Online], 2011/2 | 2011,
Online since 30 June 2011, connection on 28 October 2019. URL : http://journals.openedition.org/
chinaperspectives/5588 
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Ilan Alon, Julian Chang, Marc
Fetscherin, Christoph Lattemann
and John R. McIntyre (eds.), China
Rules Globalization and Political
Transformation
Palgrave, MacMillan, Basingstoke and New York, 2009, xxi + 307 pp.
Xavier Richet
1 Globalisation  has  ushered  in  a  new
phenomenon on which experts have been
focusing: the internationalisation of firms
from  emerging  countries  such  as  China.
Still  limited  in  number  and  invested
capital,  they  are  penetrating  multiple
markets,  north  and  south,  seeking
production  factors  (raw  materials,
technologies, human capital) and markets.
The  accumulation  of  financial  resources
and  technical  as  well  as  managerial
knowhow  due  to  industrial  cooperation
and  expansion  favours  greenfield
investments  and  acquisitions  of
sometimes prestigious assets (such as the
Chinese  automaker  Geely’s  purchase  of
Volvo).
2 Big  media  perceives  a  threat  there.
Western  companies  try  to  protect  their
technologies,  while  governments  impose
Ilan Alon, Julian Chang, Marc Fetscherin, Christoph Lattemann and John R. McI...
China Perspectives, 2011/2 | 2011
1
rules limiting the entry of such capital into their countries. Among 100 of the most
dynamic  enterprises  from  emerging  countries  listed  in  the  2009  BCG  New  Global
Challengers,  at  least  43  are  Chinese,  involved  in  sectors  ranging  from  information
technologies to financial services. They are directly or indirectly state-controlled, and
some are associated with intergovernmental contracts, notably in Africa, which further
eases their entry into such markets.
3 Contributors  to  this  book  explain  the  internationalisation  of  Chinese  firms  firstly
through the internal institutional context in which it comes about. This process seems
to confirm the paradigm of  John H.  Dunning’s “investment  development  path ,” which
traces a link between a nation’s development and direct investment abroad. The other
explanation is the technological and managerial expansion brought about by the influx
into China of foreign direct investment (FDI) over the past three decades.
4 The book’s first part has contributions analysing the factors that help companies build
competitive advantage and go on to capture world markets. The other two parts focus
on the link between foreign trade and direct investment,  as well  as case studies of
industries  in  which  success  abroad  testifies  to  the  effectiveness  of  the  strategies
adopted.
5 The  first  chapter  (by  Francis  Schortgen)  starts  off  with  a  dual  observation  on  the
absence of a theoretical framework or reference to understand the dynamic of Chinese
firms’  expansion in the context  of  reforms on the one hand,  and on the other the
ideological misperception on the part of Western observers who perceive a threat from
the rise of Chinese firms. Internationalisation of enterprises can be understood in a
triple context of profound reforms in the Chinese economy, the internationalisation
strategy (“going out” or “zou chu qu”) sought and encouraged by the state and adopted
by the companies, and lastly, the importance of institutional changes or interactions
they  led  to  by  opening  a  larger  space  for  the  actors.  Firms  that  internationalised
benefited  from direct  aid,  profited  from opportunities,  and knew how to  use  their
autonomy  by  relying  on  experience  gathered  over  the  years  in  the  context  of
competition opened up by economic reforms.
6 Another contribution (by Gloria L.  Ge and Daniel  Z.  Ding) highlights two important
aspects:  the  evolution  of  Chinese  firms’  internationalisation,  and  the  institutional
factors that facilitated it (Hinrich Voss, Peter J. Buckley, and Adam R. Cross also touch
on this point. See infra.). The growth of China’s direct investment abroad is very recent,
and really took off in terms of volume as well as in the number of acquisitions following
China’s admission to the World Trade Organisation in 2001. This acceleration phase was
preceded by the accumulation of competences in the framework of successive reforms
in rules governing Chinese investments abroad. Government policies have noticeably
changed in recent years, creating a suitable environment rather than fixing strict rules
to  guide  firms  seeking  to  internationalise.  The  authors’  second point  concerns  the
modalities of acquisition of competences by Chinese firms, a necessary prerequisite for
internationalisation. Dunning’s OLI paradigm (Organisation, Localisation, Internalisation)
must  be  read with John A.  Matthews’  LLL  (Linkage,  Leverage,  Learning) to  grasp this
process. In the context of internationalisation characterised by the globalisation and
disintegration  of  the  international  value  chain,  learning  and  accumulating
competences  becomes  easier.  Chinese  firms  have  succeeded  in  achieving
internationalisation even while lacking the resources of Western multinationals.
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2
7 Peter  J.  Williamson  and  Eden  Yin  complement  the  analysis  of  institutional  factors
favouring  these  firms’  internationalisation  by  stating  that  the  process  can  only  be
understood by considering two critical points. The first is the quality of interaction
between what the market wants and the different vectors of capacity of firms engaged
in  competition.  The  second is  related  to  the  level  of  friction  facing  each  group  of
enterprises (Chinese, Western) to narrow the gap and create vectors of capacity that
will facilitate their future success. The authors integrate two theoretical dimensions:
market  positioning  (Michael  Porter)  and resource-based  view (Birger  Wenerfelt)  to
explain how firms built competitive advantage. Internationalising firms mobilise three
types of capacities:
• Cost innovations by using Chinese firms’ cost advantages (i.e., capacity to produce by
lowering production costs) while maintaining quality;
• Combining capacities especially by supplying products redefined to integrate technology
and offered at low prices;
• Dynamic capacities in terms of adjustment needed to face uncertainties by relying on a high
level of flexibility and a rapid learning curve.
8 In the second part, contributions illustrate the impact of the institutional reforms of
the  previous  decades  on  Chinese  firms’  internationalisation  and  their  links  to  the
evolution of external exchanges. One contribution (by Voss, Buckley, and Cross) draws
a parallel between phases of institutional reform and of internationalisation, noting
three  periods  further  divided  into  sub-periods  corresponding  to  the  adoption  of
various regulatory measures. Each institutional advance constitutes a moment in the
development of companies’ internationalisation strategies, cautious at first but more
assured later.
9 Two contributions (by William Xiaojun Wei and Louise Curran) trace a link between
foreign direct investment and external trade by analysing the impact of investment
from  abroad,  especially  Europe,  on  China’s  specialisation.  Investments  (by  400
multinationals out of the 500 largest present in China, through more than 500,000 joint
enterprises) are observed and their impact on the specialisation of China’s exchanges
analysed.  Foreign invested firms in China account for  more than 50 percent of  the
country’s exports and imports. The study does not indicate the technology content of
these exchanges, which highlight a large gap between exports by foreign invested firms
and domestic ones.  Meanwhile,  the opening up of  markets,  especially in Europe,  to
Chinese  firms  and  these  firms’  offensive  strategies  to  procure  resources  and  find
markets have led to trade frictions between China and its main partners over products
with  low  value  added  (shoes  and  textiles)  in  “protected”  markets  (Africa).  As  for
Chinese firms’ state-supported presence in Africa, that is explained by the need to gain
access to natural resources.
10 The book’s last part, devoted to case studies of industries, illustrates very well the mix
of government policies and encouragement,  support and incentives taking different
forms.  The  book’s  editors  point  out  (p. 296):  “The curious  Chinese  case  of  outward
investment  is  an  amalgamation  of  ideological  traditions,  historic  entrepreneurial
inclinations, and cultural habits with new technologies and international standards.”
11 The  studies  grouped  in  the  book  hold  interest  as  they  present  the  conception,
framework,  and  nature  of  government  incentives  vis-à-vis  globalisation  aimed  at
supporting Chinese firms’ internationalisation. They also show the factors pushing the
firms into this process. Of course, the efficiency of this strategy is still open to question.
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3
Can the state not be content with creating a framework in which the firms can operate,
some successfully and others with difficulty in the global marketplace? Can these firms
sustain  their  international  operations?  This  is  a  research  theme  unlikely  to  be
exhausted anytime soon.
AUTHOR
XAVIER RICHET
Professor, CEFC-CNRS, Hong Kong.
Ilan Alon, Julian Chang, Marc Fetscherin, Christoph Lattemann and John R. McI...
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