Chinese expansion in the international healthcare markets: the role of Chinese OFDI in Europe Francesca Spigarelli, University of Macerata (Italy) Ping Lv, School of Economics and Management, University of Chinese Academy of Sciences (China) The research leading to these results has received funding from the People Programme (Marie Curie Actions) of the European Union’s Seventh Framework Programme FP7/ / under REA grant agreement n° The presentation does not necessarily reflect the opinion of the EU

a) To define a comprehensive theoretical framework. b) To explore the extent OFDI from China to the EU and its motivations. We address the following questions: (1) Which are main destinations in Europe for Chinese firms? (2) Does location choice vary across different HC subsectors? (3) What “wide” motivations can be identified in Chinese investments in HC sector? The paper sets the ground for a quantitative and qualitative analysis. Research goals

1.Introduction 2.Literature review 3.Chinese HC sector and the interest for Europe: a background analysis 3.1 The Chinese Policy for the HCsector 3.2 Trade and Chinese OFDI in the HC sector 4. Research design and methodology 5. Results and discussion 5.1 Chinese OFDI in EU in pharmaceutical sector 5.2 Chinese OFDI in EU in bio-tech sector 5.3 Chinese OFDI in EU in HC and medical devices sector 5.4 Discussion and research propositions 6. Conclusions Table of content

Literature review The paper is grounded on the literature on globalization of Chinese enterprises (IE&IB), and specifically on the study of: Location choice, linked to institutional based view, network theory, industrial organization (Buckley et al., 2007; Lau, 2003; Lecraw, 1977; Wells, 1983; Zhou, 2006) Motivations, based on institutional based view, resource based view (Alon et al., 2014; Amighini et al., 2013; Buckley et al., 2007; Kolstad & Wiig, 2012; Deng, 2009) the role of the context (Child, Marinova, 2014).

Gaps in the literature relatively few studies at the industry-level of analysis (Wang et al., 2012); there needs to be a more careful linkage between the variables used and theories (Deng, 2012); lack of studies on causal connections among Chinese unique institutional environments, the provision of resources, firm capabilities and wealth creation (e.g. Luo and Rui 2009); future studies should consider the role of both home and host countries and investigate how country-level factors interact with industry- and firm-level factors by adopting multilevel analysis technique (Lu et al., 2010 ).

A 3-level framework for the analysis

In the last 15 years, the Chinese Government has been embracing a large reform in the HC system to improve the quality and coverage of healthcare assistance of Chinese people. Reforms included industry upgrade and development of domestic industry (national champions). Thanks to a combined effect of supportive policies and booming internal demand, the Chinese healthcare sector has attracted investors and has become a priory for many Western companies. 3. Chinese Policies on HC

The 12th Five-Year Plan (related Plan for Health Sector Development) stressed the importance of industry upgrade, to be reached thorugh a series of strategies Technology upgrade (R&D) Standards upgrade (Manufacturing standards, Quality control standards) Capability upgrade Industry integration Go global strategy Industry upgrade core strategies

March 2015, new Plan for the healthcare sector (Essential points of the national plan for the health system and healthcare, ). 13th Five-Year Plan. HC is considered as one of the strategic sectors in which China has to make huge technological and industrial progress. Bio pharma and medical equipments are key industries to involve in this process. HC is also one of the sectors for international cooperation, where China will provide support to third countries to promote global welfare. Industry upgrade core strategies

Research design and methodology MofCom, firm level data for greenfield and non-greenfield investments (including year of investment, destination country, entry mode, overseas activities of the investment). Additional information collected for partent firm: year of foundation, ownership structure, n. of employees, listed company. Research target: all Chinese firms in HC sectors with foreign subsidiaries in EU, by the end of main sub sectors of HC industry: pharmaceutical, medical device and equipment, biotechnology. Output: map of “where to where”

Chinese OFDI in EU in pharmaceutical sector 69.6% sales and services 34.8% R&D 13.% production

Bio Tech sector 80% sales and services 30% R&D 50% production

Medical device sector 91.4% sales and services 31.4% R&D 34.3% production

1.Chinese firms are mainly located in the coastal areas, reflecting the well-known unbalanced geographic intensity of industrial development, and the disparity of openness to international trade and OFDI of Chinese provinces (Poncet, 2005). 2.Chinese investments are unevenly distributed within Europe. There is a strong polarization of “where to where”. Localizations of “pairs” in HC sectors reflect a duality: investments from leading provinces tend to flow to leading EU countries, where expertize and market size justify the interest of Chinese investors. Discussion

3. The 3 HC sub-sectors are experiencing different trends. 4. While “secondary innovation” motivations vary over sector, there is a focus on Europe as an outlet market. Production can also be considered as an important motivation, especially for bio-technology. Discussion

1.Home province specific conditions related to institutional environment, including regulatory regional policies, can impact on decision to invest abroad of Chinese firms in HC sector. 2.Host country market size and endowment of technology/knowledge assets attracts Chinese OFDI in the HC sectors in Europe. Propositions

3.Home and host characteristics of HC industry, such as the degree of competition, foreign presence, technological development within the industry can impact on the scope and location of Chinese investments in Europe, in the HC sector. 4.Motivations of location choice and motivation of global expansion can differ in subsector of the HC industry, based on sub-sector specificity (as R&D maturity, industry competition) and specific institutional background (as specific policy support) Propositions

Scholars: Home and host location characteristics can significantly affect the pattern of Chinese OFDI; sub-sectorial specificity Policy: negotiation of the EU-China Bilateral Investment; investment promotion policies. Preliminary conclusions