This story was published in the SCMP’s Education Post on 27 September, 2016.
One of the world’s most renowned researchers on developing economies, Anil K. Gupta, professor of strategy, globalisation and entrepreneurship at the University of Maryland’s Robert H. Smith School of Business, delivered a speech on “China Inc on the Global Stage”, and assessed the future of the mainland’s outbound investment strategy.
The acquisition of natural resources is often cited as the driving force behind China’s outbound direct investment (ODI). Gupta refuted this idea. “There is no way China Inc could acquire all the natural resources that China as a country needs,” he said, noting it can only acquire a fraction of what is needed, and that natural resources are something of a red herring for mainland companies, who often buy them for the sake of it.
The greater driving forces of China’s ODI include access to markets, technologies and brands, strategies to scale up for global success, national security, and capital flight, he said.
In recent years, there has been a trend for China to acquire complex organisations. Gupta highlighted some industry sector trends which showed that from 2005 until around 2014 the bulk of Chinese outbound investment went into natural resources, real estate, and agriculture. But that trend has begun to shift. “Over the last two or three years, the game has shifted rapidly towards acquiring technologies, brands and so on. These require much more complex organisational skills,” said Gupta. This means bigger organisational challenges for Chinese companies.
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Rebecca Simpson. Writer and editor. 