1. Susan Mays, Ph.D., contact mays999@gmail.commays999@gmail.com Globex Faculty Fellow, Peking University; Faculty, The University of Texas at Austin China’s Economy: Technology, Growth, and Global Connections The Private Sector and FDI/OFDI 北京大学工学院 PKU College of Engineering Globex

2. 2 What kinds of organizations make up the private sector? 2.Domestic private and foreign-invested enterprises (with only 25% foreign ownership, get “FIE” status) 1. Small domestic private: much from agricultural reforms, migrants, etc. 4. Some Sino-foreign JVs (blend with FDI) 5. FDI 3. Foreign companies (WFOE) …Also, let’s look at China’s OFDI (partial state, partial private)

3. 3 Estimates of the size of China’s domestic and foreign private sector range from 50 to 70 percent Source: Yasheng Huang, Capitalism with Chinese Characteristics: Entrepreneurship and the State, 2008.

4. 4 Notice FDI increases; China #1 in world, but India surpassed in 2015…..also OFDI rapidly, recently catches up with FDI

5. 5 Outbound: China’s outbound investment (OFDI or ODI) is up 2x in past 5 yrs and >10x in past 10 yrs (~US$130b in 2015)

6. 6 China’s OFDI destinations, considering capital flows through “off shore financial centers (OFCs),” mainly Hong Kong

7. 7 On the outbound side, China’s overseas M&A activity is increasingly in developed economies Source: Rhodium Group, Hanemann and Bao, “A New Momentum for FDI Reforms in China,” 2013 Outbound FDI reached US$90B in 2013

8. 8 US is now China’s top destination for OFDI

9. 9 China’s FDI/GDP ratio was high even with low GDP/capita, especially compared to other fast developing Asian nations Source: Rhodium Group, Hanemann and Bao, “A New Momentum for FDI Reforms in China,” 2013

10. 10 China is relatively “restrictive” for FDI Source: Rhodium Group, Hanemann and Bao, “A New Momentum for FDI Reforms in China,” 2013

11. 11 China’s “restrictiveness” on FDI is higher in services, but overall it has decreased over time Source: Rhodium Group, Hanemann and Bao, “A New Momentum for FDI Reforms in China,” 2013

12. 12 Yet, FDI in China is increasingly in the service sector Source: Rhodium Group, Hanemann and Bao, “A New Momentum for FDI Reforms in China,” 2013

13. 13 “Chinese” private multinational enterprises and their foreign subsidiaries: an analysis Source: Lutao Ning and Dyland Sutherland, “Internationalization of China’s Private-sector MNEs: An Analysis of the Motivations for Foreign Affiliate Formation,” Thunderbird International Business Review, 2012.

14. 14 Source: Lutao Ning and Dyland Sutherland, “Internationalization of China’s Private-sector MNEs: An Analysis of the Motivations for Foreign Affiliate Formation,” Thunderbird International Business Review, 2012. “Chinese” private multinational enterprises and their foreign subsidiaries: an analysis