[NBR analysisvolume 16, number 3]

december 2005

*NBR :

This essay examines the forces that are pushing Chinese firms to expand their overseas
operations, the obstacles to their success, and the implications for policymakers in China and
abroad.
Main Argument:
Fierce economic competition and declining domestic revenues, combined with government
encouragement and financial support, are pushing Chinese firms to globalize in order
to establish local sales and distribution networks in host countries, support exports and open
up new markets, secure access to raw materials and natural resources, and acquire technology,
cutting-edge manufacturing know-how, and global brands. as late entrants to transnational
commerce, however, Chinese firms are disadvantaged in a number of ways, including lacking
experience in managing mergers and developing local and brand recognition.
Policy Implications: China’s emergence as a capital exporter, accomplished largely through the recycling of its
huge domestic savings and foreign currency reserves, should benefit the global economy
and improve China’s global standing. in addition, the relocation of China’s light manufacturing
to other emerging economies should enhance China’s image in the developing
world. if Chinese firms prove capable of successfully managing and turning around new acquisitions,
China will likely be able to make the leap from a manufacturing center to a global
corporate powerhouse. The aggressive efforts of Chinese firms to secure new resource suppliers are renovating the
moribund commodity and industrial sectors in various countries, supplementing beijing’s
diplomatic efforts to increase international support for China, and may even reduce the
willingness of U.s. allies to support Washington in disputes with beijing. as Chinese companies increasingly compete in developed markets, greater competition
will force these companies to conform to higher standards of corporate governance, accountability,
transparency, and social responsibility.