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The Internationalization of Chinese Firms in the 21st Century

Info: 26516 words (106 pages) Dissertation
Published: 13th Dec 2019

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List of Abbreviations


Chapter 1    Introduction


A New Beginning


Definition Scope

Conceptual Framework

Research Design

Chapter 2      Literature Review

State Driven Expansion

Market Driven Expansion

Critique of Existing Literature

Chapter 3: Chinese Outward Direct Investment

Chinese Overseas Investment in the Early 2000s

Chinese Overseas Investment from 2010 Onwards

Overseas Investment Destinations

Adjusting for Distortions


Chapter 4: The Chinese Diaspora

Global Trend

Chapter 5: Role of the Chinese Diaspora


Chinese Business Associations



Relations with the Local Population

Government and NGO Initiatives

Chapter 6: Ethnicity and OFDI Correlations

Aggregate Level

Country/Economic Zone Level

The United States of America



Chapter 7: Conclusion



Appendix 1: Overseas Chinese Population by Region

Appendix 2: 2014 MOFCOM Data of Chinese OFDI Stock and Adjusted Number

List of Abbreviations

CCP   Chinese Communist Party

COR   Country of Residence

EXIM   Export Import Bank

FDI   Foreign Direct Investment

IMF   International Monetary Funds

IPE   International Political Economy

M&A   Mergers and Acquisitions

MNC   Multinational Corporation

MOFCOM  Ministry of Commerce

NGO   Non-governmental Organization

OBOR   One Belt One Road

OCAC   Overseas Community Affairs Council

OCAO   Overseas Chinese Affairs Office

OFDI   Outward Foreign Direct Investment

OFC   Offshore Financial Centers

POE   Privately-Owned Enterprises

SAFE   State Administration of Foreign Exchange

SME    Small and Medium-Sized Enterprises

SOE   State-Owned Enterprises

SPV   Special Purpose Vehicles

UNCTAD  United Nations Conference on Trade and Development

WCEC   World Chinese Entrepreneur Convention


China’s economy has experienced tremendous growth since the early 1980s. The inception of Special Economic Zones in selected cities marked a historical milestone. China became one the top destinations for FDI, giving the economy a much needed boost. As the Chinese economy prospered and maintained a high growth in the 21st century, another transformation awaits. Growth has slowed down and Chinese outbound investments have increased dramatically. Moreover, the characteristics of Chinese firms “going out” are distinctive in many respects. Other distinctive features about China are its diaspora, the largest in the world, and its relationship-based business practices. This thesis will examine how the Chinese diaspora could have an effect on Chinese overseas investment by looking at the investment levels and overseas Chinese population for different countries.

Key Words: Chinese Diaspora; Overseas Chinese; Outward Foreign Direct Investment;  Internationalization;  International Relations; Business Networks

Chapter 1    Introduction

Chinese firms’ are internationalizing at an astonishing rate. Besides speed, the pattern of internationalization is also confounding, which share very few characteristics with previous developing countries. This thesis will define the characteristics of Chinese firms’ internationalization process, and then test some working hypothesis. First, some general background is necessary to put the phenomenon into context.


As globalization was becoming an unstoppable force in the world several decades ago, the number of corporations with cross-border business activities had skyrocketed. The trend continues to present day, with more and more corporations embracing the merits of globalization and venture out of their domestic territory. These enormously powerful entities are known by many names, including: multinational corporations (MNC), multinational enterprises (MNE) or transnational corporations (TNC) – but, for the sake of simplicity, only MNCs will be used in this thesis.

The birth of MNCs predates the era of globalization, tracing its roots back to centuries earlier. What is new – and with far-reaching implications – is the number and sustained increase of these corporate entities. According to data compiled by Jaworek and Kuzel[①], the number of parent corporations with foreign affiliates jumped from 38,541 in 1995 to 103,786 in 2010. Unsurprisingly, most of the MNCs came from developed countries like the United States or European countries. Over the years, more countries become industrialized, which is followed by their companies joining the international market; a pattern that is largely similar to that of the early developed countries.

In the late twentieth and early twenty first century, some developing countries were experiencing rapid economic growth. Contrary to the expectations of many, the companies of these developing countries did not follow the tried-and-true path previously taken by MNCs from developed economies. Instead, the behaviour of these developing country firms shattered some of the economic theories formulated by western scholars. Specifically, developing countries became to invest abroad much earlier than expected (and perhaps desired). The investment outflow from developing economies started modestly, but a drop is beginning to turn into a river as outward direct investment grew dramatically. In 2015, the year with the latest reliable data, foreign direct investment from emerging markets make up 35 per cent of the total[②]. The percentage is even more impressive considering only 8 years earlier, their share is only 13 per cent[③]. As for the future, most experts agree that the upward trend will continue upwards.

The curious case of current developing countries behaving differently from past developing countries deserves a closer analysis. The fact that a new national behaviour is observed is not, or at least shouldn’t be, unexpected – after all, the world has changed much since the initial proliferation of MNCs. But, it remains crucial to study such a phenomenon to better understand the development strategy of different countries and draw lessons from its failures or successes.

Among today’s developing economies, China has taken the top spot for a number of economic indicators, including outward foreign direct investment (OFDI). Moreover, the internationalization of its firms has shown some distinctive traits. Capitalism with Chinese characteristics has truly gone international. The stark contrast of Chinese firms’ internationalization process with that of western firms’ or even firms from other developing countries has piqued my interest and formed the basis for my thesis topic. Before diving into the possible causes, however, it is necessary to clearly and accurately define the phenomenon and its significance, which will be addressed in the next section.

A New Beginning

Deng Xiaoping’s opening up of the economy to the world in the early 1980s was a milestone for China’s economic history. It was a radical shift from his predecessor and the world has taken notice. A much subtler and gradual shift has been happening to the Chinese economy and this time, people will not only notice, but will be affected in a much more profound way.  Companies from China, whether it’s private or state owned, has embarked on a journey onto the international stage. More and more firms are seeking opportunities abroad through a variety of channels. These channels include but not limited to: portfolio investments, green-field investments, brown-field investments, mergers and acquisitions, and various other business expansion strategies. The trend of rising overseas business activities has caught the attention of scholars and there has been a steady growth of literature covering this topic. China had virtually no OFDI in as recent as 1983[④]. In just a few short decades, China’s OFDI surged to nearly US$130 billion[⑤]. In fact, China’s long-held position of a net FDI inflow country is going to change very soon, as outbound investment is forecasted to overtake the FDI inflows in the next few years[⑥]. The upward trend in Chinese outward investment gives research in this area increasing significance.

Looking underneath all the investment numbers reveals an interesting trend. China’s FDI story begins with the dominance of state-owned enterprises (SOE). In the early 1980s and through much of the 1990s, SOE investments almost comprise China’s entire OFDI. As privately-owned enterprises (POE) began to take root in the domestic economy, so too had their role in OFDI. The role of private enterprises had steadily risen, challenging the dominance of SOEs in this field. According to the State Council, for the first time, China’s private enterprises played a larger role than SOEs in 2015[⑦].  For that year, private companies comprise 65.3 per cent of OFDI contributions, while SOEs make up the remainder[⑧].

It is at this important juncture – as POEs’ overseas investments surpass SOEs’ and as investment outflows are poised to overtake inflows – that I want to focus on in my research. Throughout these changes, a new investment pattern has emerged among Chinese businesses. Researchers have found that Chinese investments in developed countries have surged and continues to grow.  A large portion of Chinese OFDI has been going into advanced economies like the United States, European Union, and Australia[⑨]. Additionally, scholars have found that true final destination for Chinese investments are diverse, investing in both near and far away countries. Because of certain business practices such as using tax havens to invest, it is more illustrative to look at the OFDI stock rather than flow[⑩]. With the distortions removed, China has major investments the largest investments in Asia, followed closely by Europe and North America[⑪].

The research for China’s atypical investment behaviour is significant in a number of ways. First, it challenges predictive power of various political and economic models constructed mostly by western scholars.  China’s behaviour, as well as that of other developing countries’, had highlighted the weaknesses of economic and political theories modelled after western experience. Second, the success of China’s actions can potentially set an example for other countries. Last but not least, understanding China’s investment trend could provide guidance, albeit an imperfect one, to its future developments. Furthermore, as China’s financial clout continues upward and Chinese businesses reach ever deeper into other nations, governments and people alike are understandably anxious. Research into this area can help demystify the phenomenon and bring about more transparency and understanding.


Definition Scope

The task to measure the degree of internationalization of Chinese firms is anything but easy. There are many dimensions to what constitutes “internationalization”, encompassing a wide range of business activities, including ones that may not even be monetary in nature. Such complexities are difficult to quantify and therefore not measureable. International trade, which is well within the definition of firm internationalization, will also outside the scope of this thesis. The history of international trade for Chinese firms are quite long, and this paper aims to capture the recent emergence of Chinese firms investing abroad. Instead, this paper employs a more limited definition of internationalization. Specifically, internationalization will refer to the level investment activities that are considered to be foreign direct investment. As the definition of FDI may vary, United Nation Trade and Development’s (UNTAD) definition will be used:

An investment made to acquire lasting interest in enterprises operating outside of the      economy of the investor. a direct investment enterprise is an incorporated or unincorporated enterprise in which a single foreign investor either owns 10 per cent or more of the ordinary shares or voting power of an enterprise (unless it can be proven that the 10 per cent ownership does not allow the investor an effective voice in the management) or owns less than 10 per cent of the ordinary shares or voting power of an enterprise, yet still maintains an effective voice in management.[⑫]

According to this definition, a variety of business activities will not be taken into calculations. Portfolio investments and other indirect investment vehicles, although potentially important, are not studied in this paper. This is simply because the most reliable comes from FDI measurements, which various governmental and non-governmental organizations routinely collect and publish.

Overseas Chinese or Chinese diaspora is a tricky term to define. As most governments or organizations that report on data on this population relies on self-identification, a general definition will suffice. Anyone with Chinese ancestry, including the various ethnic groups in China, can be classified as Overseas Chinese. Unfortunately, due to time and resource constraints, first-hand research on the population of Chinese diaspora is not possible. My research will have to be dependent on reports from third-parties such as government agencies and NGOs. The major downside is that many countries have outdated information and data from other organizations may have reliability issues.

Conceptual Framework

This paper aims to find a link, and ideally a causal relation, for two defining feature of Chinese overseas investment:

  1. Chinese firms invest in countries at all levels of development, with a heavier focus on developed nations in more recent years
  2. Chinese firms invest heavily in both, countries that are geographically proximate and distant

The following working hypotheses strive to complement the existing literature on the internationalization of Chinese businesses. Developments in this field are fast evolving, as there is a constant release of new data and information. My research will take advantage of new developments, and build upon other scholars’ work and fill any potential gap in the literature. The first two working hypotheses attempts to find a connection between the investment destination of Chinese firms and the population of Chinese diaspora in the destination country.

Working hypothesis: the diaspora population in the host country will have a positive correlation with the amount of foreign direct investment from the home country.

The population of diaspora may affect the amount of Chinese foreign direct investment in the country. This working hypothesis contends that the higher the amount of Chinese diaspora, the higher the amount of investment that goes into the country. Various factors such as culture affinity, business ties, and political connections may have explanatory power.

Research Design

A mixed approach will be employed to analyze the three aforementioned working hypotheses. Due to the nature of the independent and dependent variables of working hypothesis I and II, quantitative analysis will be more pertinent. Case studies and country comparisons will also be used to test the predictability and reliability of the three working hypotheses. Details of different variables and research design for each working hypothesis below:

Working Hypothesis:the independent variable is the total Chinese FDI in the country for a given year. A complete list of countries that China had invested in the past and present will be complied. Such data will be charted to get the historic FDI trend and pinpoint any significant fluctuations. The dependent variable is the population of Chinese diaspora in a given country. Data on the population growth or decline of this ethnic group will be used to compare with the FDI level.

China is not the only country with a large diaspora population. India also has this characteristic, which presents an excellent opportunity for comparison for future studies. The same metrics, such as FDI level and success rate, will be used to compare with Indian diaspora population. Such a comparison can demonstrate how the diaspora can affect the investment outcome of the home country, if there’s a connection at all. For example, since India exhibited FDI pattern that is markedly different from China. Can diaspora be one of the underlying causes for their difference?

Chapter 2      Literature Review

The growth of Chinese outward direct investment has drawn interest from many disciplines, ranging from political science to environmental science. The most abundant literature on this topic is found, logically, in the business discipline. To a smaller degree, scholars from international relations and politics have also dived into this topic. There is also a wealth of case studies on high profile business transactions between Chinese companies and foreign firms. Other analyses are on the macro level, with government policies and the general market environment given more consideration. This literature review will draw on writings from multiple disciplines and at various levels of analysis. Scholars that investigate the behaviour of Chinese OFDI can be divided into 2 groups: state driven and market driven

State Driven Expansion

Since the founding of the People’s Republic of China, Beijing has played an important role in the economy.  The state driven school contends that Chinese government’s policies are the impetus for Chinese firms going abroad. Indeed, they need not look further than the State Council website to see that the government’s official stance is for companies to “go out,” which has come to be called China’s “going out” strategy. The school’s main argument is based on policy support from the various levels of the Chinese government, and state-owned enterprises as political vehicles.

Beijing has used a variety of direct and indirect methods to guide Chinese investments overseas. One of the way is through the implementation of supporting policies, which Beijing has been using extensively. Policy supports range from easier access to foreign exchange to bank supports to encourage firms to invest abroad[⑬]. Chinese firms are late to the game when it comes to international business. Their disadvantage has been someone offset by the various government policies that increase their competitiveness to the incumbents[⑭]. There are numerous government agencies that execute these policies and provide incentives for firms. The export import bank (EXIM) is one of the main actors. Working in conjunction with other state-owned banks, EXIM can provide low lending rates, fast approval process and flexible terms to businesses going overseas[⑮]. Only sectors and regions deemed important to the government can take advantage of these offers, however.

Some scholars in this school see Beijing’s involvement in a more direct manner. Wang pointed out that Beijing prioritizes certain sectors and industries for OFDI. They want the firms to invest in these sectors and industries to fulfill China’s ambitions[⑯]. The government’s heavy handedness in the economy is no longer domestic, but global. The objective of obtaining strategic resources, such as capital, knowhow, raw materials, means that China needs to target both international and domestic markets. The principle of “two resources and two markets” encourages Chinese firms to advantage of both markets[⑰].

The various ministries that govern state-owned enterprises makes these entities less than rational economic agents. SOEs have the mandate of putting the Chinese government first and profitability second. Thus, any business activities from SOE were strongly scrutinize by foreign companies and governments. They worry about any hidden agenda from these organizations, and oftentimes see them as merely an extension of the CCP. Wang has found that Chinese SOEs investment habits are markedly different from that of POEs’. Generally speaking, political risks were more acceptable to SOEs compared to POEs[⑱]. There are also many well documented case of SOEs serving as political vehicles to influence foreign governments or firms. Economic statecraft has regained its popularity partly due to China’s growing economic clout. Beijing’s success of establishing strong diplomatic relations with certain regimes can be attributed to SOE and economic maneuvers. China’s relations with many countries in Africa can be said to be built on economic foundations[⑲]. The same can be said in regards to China’s relations with Southeast Asia[⑳].

The state does have strong control of SOEs, if not absolute control as most outsiders see it. It is even more so when it comes to overseas direct investment. For overseas investment projects, SOEs have to go through a rigorous approval process. This is an effective way to direct SOEs to expand in the desired sector and regions[21]. Such a process explains the varied nature of Chinese investment destination. Specifically, the government targeted countries that were resource-rich or technologically advanced, and directed the firms to invest there[22]. China’s vast ownership of natural resources all around the world is a testament to its success at directing overseas investments.

Market Driven Expansion

Market forces are the main drivers for China’s growing investment appetite for these group of scholars. Proponents in this school acknowledge that Beijing has policies in place with the objective of promoting OFDI. What they disagree with the State-led school is the effect of such policies in influencing firm behaviour. Naturally, scholars in this school rely more on quantitative assess firm motivation.

Tobias is one of the scholars that see economic factors as the primary driving force. Through IPE approaches, he found that both SOE and POE’s motivation for overseas expansion are largely economic[23]. For example, the enormous outward investments by the large SOEs in the 1990s were the result of the corporate restructuring that placed new emphasis on profitability[24]. Progressive reforms by the government has given SOEs more autonomy and flexibility to execute business maneuvers. Beijing has demonstrated time and time again that SOEs need to be independently profitable to stay in business. The ongoing effort to eliminate “zombie” firms that are living on government lifeline illustrates the central government’s commitment.

Stepping onto the international market is the logical step for many Chinese businesses after establishing a stable base in the domestic market. The investment condition has been quite favourable for Chinese firms vis-à-vis other foreign firms in certain periods. The financial crisis in 2008 is a prime example. The Chinese economy that was relatively insulated gave Chinese firms an advantage at that time. Attracted by deflated prices abroad, Chinese outward investments surged drastically buying up foreign companies on discount[25].

Findings by Li also support that Chinese firms, even SOEs, are profit driven. As China’s domestic market growth slows, Chinese firms need to look increasingly outwards for growth opportunities. Li has found that Chinese MNC’s foreign operations are more profitable than domestic ones[26]. One of China’s biggest SOE, the China State Construction Engineering Corporation, actually have much more profitable operations abroad than at home[27]. There is ample evidence that can help explain this: Chinese companies going abroad were able to move up the value chain, thus improving profitability. In other cases, Chinese companies gain access to more affluent markets leading to better margins[28].

Scholars often tackle the state-led school by highlighting weaknesses in their argument. Tobias has pointed out that there is no master plan or “grand” strategy from the Central Committee[29]. Moreover, he emphasized that the Chinese government cannot be viewed as a monolithic entity. Competition and conflicting interests among local governments, state agencies, and officials create implementation issues. Also, the investment experience of Chinese firms serves as empirical evidence that there is no coherent government strategy. When expanding abroad, the biggest competitors for them are actually other Chinese firms attempting to enter the same market[30].

Critique of Existing Literature

The strength of the two groups has changed over time, in parallel with the evolving Chinese economy. As private enterprises began to dominate the outward investment scene, arguments for a state-led investment regime are weakened. Proponents of the state-led group often cite SOEs as evidence for state meddling of economic affairs. By that same logic, the steady decline of SOE’s contribution to OFDI means that market forces are playing a bigger part. However, it does not mean that the state-driven school has no valid argument. They have strong evidence and ample cases to show Beijing active role in guiding the market. It does mean, though, that the arguments need to be updated. In particular, the state-driven school should expand their inquiry beyond SOE and look in-depth into Beijing’s influence on POE. As the balance of power changes, scholars need to be mindful of the changes and remain flexible. Conversely, the market-led school has gained greater credibility.

Chinese outward investment has been experiencing some drastic changes, which is reflected on the blossoming of literature on this topic in recent years. Research have traditionally focused on inflow of foreign direct investment rather than outflow from China. As an infant topic, the literature is maturing quite quickly – but like most things politics – far from reaching consensus. Both schools of thought, the state vs the market, have its strong and weak points. It seems, though, the influence of the market and government are ever-present for Chinese companies. Indeed, the arguments purported by the two schools are not be contradictory. The forces affecting firms’ decision can be better seen as a push and a pull. Government policies that encourages firms to go out can be viewed as a pushing force. On the other hand, market potential and opportunities can be viewed as a pulling force.

The push and pull force are certainly not equal, with one likely being much stronger in certain periods of time than the other. The constellation of events in recent history have moved Chinese firms in one direction: out. For instance, Beijing encourages firms to expand overseas with its “going out” policy. Meanwhile, the onset of globalization and the liberalization of trade and investment restrictions created the perfect chance for firms to start investing abroad. Borrowing from the psychology discipline, China’s “going out” strategy has ascended the pyramid from survival to self-actualization[31]. When China was focusing on survival, the government had a strong push force for firms to go out to gather resources. As different levels of national “needs” are met, Beijing no longer have the urgency to push firms to go abroad. Instead, the serendipity of favourable market conditions are pulling firms out. The psychological model for human motivation works surprisingly well for national motivation as well.

The two school of scholars provided compelling arguments, well supported with evidence. This is because the level of outward foreign direct investment is so enormous and the Chinese MNCs so diverse that any one factor will not be the sole cause. Different sector of the economy will have different forces that dominate. Firms in sectors that are predominately in the government’s domain, such as energy, will surely be more impacted by the state. The major driving force behind the recent uptick in OFDI is more likely to be attributable to market forces, however. There have not been any significant policy changes that could explain the impressive rate of growth.

A major shortcoming for the two school is that they fail to look into other countries. Case comparisons with similar economies can bring much insight into the current discourse. This is especially true for the market-led group. They demonstrated that the environment is conducive to investing, but fail to clearly articulate why only China is experiencing the change to such an extent. Also, what exactly distinguish Chinese firms from firms in other developing countries? Questions like these can be better understood by examining businesses from similar economies and see how and why their paths diverge.

Chapter 3: Chinese Outward Direct Investment

Before we tackle the gargantuan task of finding a connection between Chinese OFDI and the Chinese Diaspora, an examination of Chinese OFDI data is necessary. What appears to be a straightforward undertaking is anything but straightforward: it is worthy of a lengthy thesis paper all on its own.  The sheer quantity, size, and type of transactions make it hard to keep track of. On top of that, there is a large number and types of organizations involved, which adds to the complexity of this issue. In short, what is shown by official figures are never truly accurate, as the origin and destination of investments are often masked by layers of financial instruments and intermediaries. Nevertheless, data from official government or NGOs are the available sources and offers insights that are hopefully not too far from reality. The practice of companies conducting their international businesses through OFCs is by no means a problem unique to China. OFCs have become lynchpins in the international financial market. In fact, a study by Haberly et al. has found that over 30 per cent of global FDI involves OFCs or tax havens[32].

The same cannot be said for China. Due to China’s economic model, historical legacies, business practices, and reporting standards, the official numbers of OFDI are grossly distorted. Chinese has long been criticized for its lack of transparency in reporting and its reliability it continually questioned There are two governmental organizations that publish data related to investments: Ministry of Commerce (MOFCOM), State Administration of Foreign Exchange (SAFE) and National Bureau of Statistics. However, data from these organizations only show the first destination for cross border transactions, rather than the final destination. Hence, the official figures neglect to take into account business practices that are prevalent in the Chinese economy namely: round tripping and offshoring.

Round-tripping: investors channel their funds overseas into special purpose vehicles (SPVs), with the ultimate goal of reinvesting it back into the local economy [Figure 1]. The invested funds would then be considered FDI into China, and as such, can take advantage of government incentives for foreign investments. According to empirical findings from Xiao[33], around 40 per cent of total funds that go into Hong Kong are re-invested back into China. 30 per cent of the funds will stay in Hong Kong, while the remaining 30 per cent would be re-invested in other countries around the world.

Offshoring: investors channeling their funds into offshore financial centers (OFC), which would then be reinvested into another country [Figure 2]. There is not consensus among scholars on what constitutes a OFC, so the definition varies. According to the International Monetary Fund (IMF) Offshore centers have three main characteristics[34]:

  1. Primary busienss of a relatively large amount of financial institutions in the country is with non-residents;
  2. The external assets and liabilities is disaproportional to domestic financial intermediation designed to finance domestic economies; and
  3. Centers that provide some or all of these services: low or zero taxation, moderate or light financial regulation, banking secrecy and anonymity.

Because of these characteristics, offshore financial centers are sometimes called tax havens. China have significant OFDI in juristidictions that qualifies as an OFC, namely Caymen Islands, British Virgin Islands, and Hong Kong.

Chinese Overseas Investment in the Early 2000s

Chinese OFDI in the early 2000 is miniscule, relative to both the size of its economy and in comparison to other countries. In the first half of the decade, OFDI remained low – never surpassing the US$10 billion [Figure 3]. State-owned enterprises dominated during this period. M&As from these organizations are responsible for almost the entire OFDI figure[35].

     Meaningful growth only happened in the latter half of the decade, when OFDI broke through the US$10 billion mark. Since then, OFDI had consistently increased year over year, reaching almost US$60 billion by 2009. That is over 5000 per cent increase in a decade’s time. Even with such an extraordinary growth rate, China’s investment footprint was still meager compared to longstanding oversea investors like United States and Japan. China’s growing clout in the financial will not truly materialize until the next decade.

Chinese Overseas Investment from 2010 Onwards

Chinese OFDI has been growing at a rapid pace since 2010. Between 2010 and 2016, OFDI expanded from US$68 billion to US170 billion, a 147 per cent increase [Figure 4].[36]. In terms of global share, China has increased from a mere 0.2 per cent in 2002 to 9.9 per cent in 2015[37].  In fact, China has surpassed Japan in 2014 to become the second largest overseas investor in the world[38]. Only the United States is placed higher since then. Compared to the previous decade, POE has been a lot more active. They account for an ever larger portion of Chinese OFDI. In fact, private companies have displaced SOEs as the main driver of Chinese OFDI since 2014, according to some groups[39].

Overseas Investment Destinations

Based on official figures, Chinese OFDI is fairly concentrated. The top five destinations make up the majority of Chinese outbound investments. In 2015, Hong Kong alone accounts for 57 per cent of OFDI, followed by Latin America with 14 per cent, and OFCs with 11 per cent. Looking at data from the past couple years yield a similar pattern, with the same big players emerging at the top. Hong Kong, Latin America, OFCs have been consistently on top of China’s OFDI list.

Adjusting for Distortions

The data presented in the previous two sections are retrieved directly from MOFCOM or United Nations Conference on Trade and Development (UNCTAD). Consequently, the figures do not take into account distortions created from offshoring and round-tripping. These distortions must be corrected to determine the true recipients of Chinese OFDI and reveal the actual pattern of Chinese OFDI. To accomplish this, multiple sources from various governmental and non-governmental institutions have to be utilized.  There are two main techniques used by scholars and analyst:

  1. Adjust the official Chinese figures by using a historical rate of offshoring and round-tripping from OFCs and redistribute them to other countries based on their share of OFDI excluding the OFCs
  2. Track individual business deals made by Chinese-owned firms

All techniques are its strengths and drawbacks. The first method relies on a historical offshoring and round-tripping rate that may have become irrelevant in the current circumstances. Moreover, the redistribution of OFDI based on the country’s current share overly simplifies the nature of overseas investments. The figures for big partners, such as the United States, would likely be exaggerated, while smaller ones would be understated. Additionally, the release of official data is often slow, lagging a year or more behind.

Technique number two also has some issues. Firstly, the institutions that are managing these trackers are non-governmental. However, they are well-respected institutions and their data are made available for the public to inspect and verify. The American Enterprise Solutions and The Heritage Foundation, which runs the most comprehensive and detailed Chinese investment tracker, has a history dating back to 1938, and possesses strong research integrity. The bigger issue is their methodology for collecting data. As there are myriads of bilateral transactions, only big investments (typically US$500,000 plus) can be tracked to some degree of accuracy.

Combining the data gathered from the two evaluation models can reduce the severity of their deficiencies. While the data obtained is still imperfect, it is a far better alternative than relying on a single source, which tends to have egregious biases and distortions. Virtually all institutions, be it Chinese government, host government or NGOs, have vastly different statistics regarding FDI. For instance, the Canadian government data on the stock of  Chinese investments had reached a multiple of 7.9 compared to official Chinese data in 2006[40]. That difference in reported figures had dropped to 2.7 times in 2014, but that’s still a massive chasm. Averaging reported numbers from several sources if the best route to take until MOFCOM changes its reporting policies and standards.


The calculations are based on the historical rate of offshoring and round-tripping of Chinese investments in Hong Kong. The total ODI going out will be lesser by 40 per cent of the amount going into Hong Kong, while 30 per cent would remain in Hong Kong. Jurisdictions that match IMF’s definition of offshore financial centers. and can reasonably be expected to be just a stopover destination, would have their funds redistributed on a weighted basis to other countries. In my analysis, funds from Cayman Islands, British Virgin Islands, Luxembourg and the remaining 30 per cent of Hong Kong’s fund are redistributed to other countries (see Appendix). Then, the adjusted figures and the numbers obtained from Chinese Investment Tracker would be averaged.

As expected, the resulting distribution of funds shows an entirely different picture of Chinese ODI for 2015. Although Hong Kong still makes up a lion’s share of Chinese ODI, other countries’ role has been elevated greatly. The United States and Australia, for instance, went from just 4 per cent and 3 per cent to 10 per cent and 5 per cent respectively. Approximately US$ 17 billion went to the United States, which is consistently with numbers found in other reports.  The next four ranking economies are The Netherlands, Singapore, Russia and United Kingdom [Figure 5]. The remaining countries comprise 38 per cent of the total. Results from 2014 and 2013 yields similar results. United States, Australia, United Kingdom and Singapore have consistently been ranked as the top destination for Chinese ODI. The remaining countries
usually account for roughly 40 per cent or more of the total.

Figure 5: Chinese OFDI Flow in 2015

The new data reveals that Chinese ODI is much more diverse than the official figure suggests. It also confirms the trend that China has been investing heavily in developed economies, as US, UK and Australia has been prioritized.  It also supports the claim that Chinese ODI reaches both far and near, with significant portions being invested in Latin America, Oceania and North America. Research conducted by EY also found that Chinese investments are diversifying, both in terms of destination country and industry[41].

Chapter 4: The Chinese Diaspora

Overseas Chinese or Chinese diaspora, which is used interchangeably in this paper, are surprisingly ill-defined terms. In the simplest sense, the two terms refer to people from China that has moved overseas, temporarily or permanently. There are two Chinese terms widely used in academia as well: huaren to refer to Chinese nationals residing overseas and huaqiao to refer to foreigners with Chinese ancestry. In practice, when surveys and interviews are conducted, the ambiguity of the term can lead to some serious problems. Some researchers have interpreted overseas Chinese to mean any Chinese residing outside of Mainland China, so populations in Hong Kong, Macau, and Taiwan are not placed into this category. Contrariwise, others would classify the populations from all these regions as overseas Chinese. The difference in classification has implication of enormous proportions as these regions have experienced frequent emigration waves throughout history. For the purpose of this paper, overseas Chinese or Chinese diaspora would take the broader meaning to include Chinese people from these regions. Despite the diversity in culture, language and traditions between people in these regions, their commonalities are much greater, and hence it is more appropriate to evaluate them as a single group in the business context.

Being the most populous nation, China also has by far the largest diaspora in the world. There are approximately 43 million people are identified as overseas Chinese in 2015, according to Overseas Community Affairs Council (OCAC) [42]. India is a distant second, with roughly 30 million overseas Indians. Conducting population statistics on just one country is already difficult, so compiling data on an ethnic group for all 195 countries is exponentially more complex.  The constant mobility of the population, poor record-keeping of ancestry, and the uncertainty brought on by self-identification have led to major discrepancies in numbers between different sources. For aggregate data, the OCAC offers the latest and most comprehensive data that can illustrate the global trend of the overseas Chinese population. For country specific analysis, data from national census would be used instead, whenever possible. One major problem remains from both database, which is the substantial number of undocumented or unreported workers in some places. In such cases, data would have to be derived from local experts and their estimates.

Global Trend

The emigration of Chinese people has an ancient history, and now ethnic Chinese have settled in all corners of the world. Data from OCAC shows that at the end of 2000, there are 35.1 million overseas Chinese people[43]. Fast forward 15 years and there are 43.3 million overseas Chinese (see Appendix). An addition of 8 million overseas Chinese may seem like a dramatic increase, but it was growing at a reasonable rate of 1.5 per cent per annum. Over the 15-year period, the Chinese diaspora have increased 24 per cent. Both the percentage and absolute increase are lower compared to previous decades, especially in the 90s and 80s when China’s political climate was much more tumultuous.

     Due to various factors, such as geographic proximity and cultural affinity, most overseas Chinese reside within Asia. The next biggest population is in the Americas, followed by Europe, Oceania, and finally Africa. In 2000, overseas Chinese in Asia comprise 78 per cent of the total and Americas comprise 17 per cent. The remaining 5 per cent is divided amongst Europe (3 per cent), Oceania (2 per cent), and Africa (<1 per cent) [Figure 6].

As the domestic and international political environment evolved in conjunction with the advancement of technology, a new pattern of Chinese immigration has emerged. The new migrants of the 21st century are travelling far and wide. Asia, while still popular, has been overtaken by the Americas, Europe, Oceania and Africa. While Asia has an average annual growth rate of 0.98 per cent, the Americas have 2.08 per cent, followed by Oceania with 4.39 per cent, Europe with 4.63 percent, and Africa being the highest with 9.87 per cent (see Appendix). In absolute terms, however, Africa growth is relatively small. A majority of the new generation migrants are favoring developed nations in the Americas, Europe and Oceania. With such a big difference in growth rates over the past decade and a half, the make-up of the Chinese diaspora has shifted to the West.

          The trend of Chinese migrants settling in developed regions of the world is likely to continue in the future. A moderate growth rate of 2 to 4 per cent is most probable as the bottleneck lies not in demand, but in supply. The rising income of China’s middle class coupled with rising environmental concerns are pushing demand for citizenships or permanent residence status to an all-time high. As an example, there are 252,497 applicants from Mainland China that are on United States’ immigration waitlist[44]. The US has immigration caps and maximum allowance for certain countries would restrict the growth rate of Chinese immigrants to low single digits. The situation is similar in countries in Europe and Oceania where demand far exceeds supply. All this suggests that growth in developed regions would outpace Asia, and account for a bigger portion of a growing pie.

Chapter 5: Role of the Chinese Diaspora

The analysis above show that there is at least some correlation between overseas Chinese population and the level of Chinese OFDI. The correlation is stronger in some cases than in others, depending on what forces are dominant. Resource availability, political amicability and geographic proximity are strong and well-studied factors that affect OFDI. To establish a causal relationship, it is imperative to look at some real-world cases and see how and in what ways Chinese diaspora shapes investment decisions.


One of the greatest asset that overseas Chinese can provide is networks. Chinese diaspora tend to favors certain cities or regions and live close together. A community can be formed this way and allow tight networks to form. Oftentimes, overseas Chinese maintains a connection with their hometown in China, forming an international network. In this section, vital networks such as business associations and personal networks would be examined in greater detail.

Chinese Business Associations

One of the most direct and observable influence of Chinese diaspora are the business associations that are actively promoted ties between China and the country of residence (COR). Common objectives of these association include: increasing trade, investment and cultural understanding. Chinese business associations are also responsible for organizing various conferences, conventions and tradeshows. These scope of these events have been expanding, with increasing number of conferences and conventions that were internationally focused. This allows for international networks to develop and strengthened over time and facilitate greater commercial and cultural cooperation. The effectiveness of these business association varies country by country and region by region. Some of these association are deemed important enough that support is given from the Chinese government through Overseas Chinese Affairs Office (OCAO). Even countries with smaller overseas Chinese population can make a noticeable difference in facilitating trade and investment, as shown in the Mexico case below:


Searching for how Chinese Associations facilitate trade is difficult, considering the fact that most of these activities would not be reported and most network building and negotiations are done behind closed doors. Luckily, professor Hearn’s book, “Diaspora and Trust: Cuba, Mexico and the Rise of China[45],” offers a rare glimpse of the influence of Chinese diaspora in these two countries on a variety of issues, including investment. In Mexico, the investment climate for Chinese firms is especially tough, given the anti-Chinese sentiment and the view that China is a competitor in the world market. Reports of racial discrimination and targeted attacks on Chinese businesses are numerous in the book and news coverage. The Chinese community seems small, with the official statistics showing only roughly 7000 ethnic Chinese in the country. Unofficial estimates are much higher, however, and US border towns like Tijuana and Mexicali are reported to have 25,000 and 35,000 Chinese descents respectively.

The Chinese associations play a central role in connect Chinese firms to Mexico. One of their goals is to improve cultural understanding and public perceptions of China. Hearn introduced a prominent Chinese-Mexican, Eduardo Auyon, who had been actively bridging ties between China and Mexico. In one instance, he donated his Chinese artifacts to a museum. Since then, Chinese government officials and Mexican politicians visit the place with the press as a symbol and recognition of Chinese heritage. More tangible effects on investment were also given. The Chinese association in Tijuana successfully lobbied a Mexican airline to offer direct flights to Shanghai, in hopes of increasing traffic from tourists. Since then, an agency was set up that assists businessmen coming from China to invest in and trade with Mexico.

Some Chinese associations also have ties with the local government. The Chamber of Chinese Enterprises works closely with the Baja California government as well as the OCAO in Guangdong on a variety of events. One of the main objective of the Chamber is “to promote Chinese investment in Mexico in the copper mining and the energy sectors,” according to Auyon, the former president of a Chinese association. The associations were also instrumental in helping investing companies to navigate the regulatory hurdles and adapt to local conditions. In 2015, the Governor of Baja California led a delegation to the Chinese city of Zhongshan and successfully attracted a Chinese firm to invest millions in the region[46]. Although who brokered is stated, it might have some connections with Auyon, whose hometown is Zhongshan.

Geely Automotive’s US$ 500 million investment in Guanajuato[47] provides another example of the critical role of Chinese associations. To facilitate Geely’s investment in Mexico, one of the Chinese association helped the company headhunt for talent, and found Li Zhuohong is a Chinese-Mexican that is fluent in Mandarin and Spanish. Li was responsible for translating and negotiating for the company to establish a factory in the city. The Chinese associations have become a go-to place for Chinese firms and government officials. Li has stated that the Chinese consulate in Mexico would call him to establish relationships with incoming businesspeople.

Despite being only a relatively small community, overseas Chinese in Mexico spared no effort trying to bridge the two nations. As mistrust is high in the country, Chinese associations have an important part to play. Companies that are interested in investing in Mexico would need their service more than ever to traverse not only the regulatory hurdles, but the racial and cultural landscape as well. The associations also have a dual role of convincing Chinese companies that Mexico presents many attractive investment opportunities and that the hurdles can be overcome.


In Germany, there is a large number of Chinese associations with various purposes with a majority of them focusing on business or cultural developments. According to the World Chinese Public Welfare Organization, Germany alone is home to 60 Chinese associations[48]. These associations serve as important gateways between Germany and China.  The German Association of Chinese Entrepreneurs, for instance, has corporate members based in China and Germany. The association organized economic and trade fairs, exhibitions and professional seminars to help local businesses as well as connect with potential investors.


Besides forming Chinese Associations, the overseas Chinese community act as facilitators in other ways. Since Chinese firms are still at a nascent stage in terms of internationalization, they often lack the requisite experience necessary to succeed. Researchers are placing a greater emphasis on relational effects on firm decisions. Social networks are seen as highly valuable avenues to connect not just personal ties, but provided added benefits. These benefits come in the form of knowledge transfer, increased learning abilities, fosters greater trust and understanding. Hence, some scholars posit that social networks can facilitate cooperation across borders[49].

Even though much of the emphasis of case studies and research have focused on formal networks, such as associations or consulates and embassies, the effectiveness of informal or personal networks cannot be overlooked. The very nature of informal networks though, makes it a difficult subject to investigate and quantify. A questionnaire conducted by Schuller showed that only a minority of Chinese businesspeople in Hamburg, Germany, were part of any formal diaspora network[50]. Rather, most of the respondents attributed their personal network and connections to be the leading factors for their investments in Germany. One explanation may be the positive effects from established businesses overseas. When overseas Chinese companies succeed, it serves as a motivator for other immigrants to go overseas or firms to expand abroad. Other scholars have found that not only small firms will follow suit, but MNCs as well[51].

Most respondents also stated that they viewed the overseas Chinese community as important factors for their decision about market entry and operations. The Chinese diaspora can be viewed as a critical resource for accessing information on the domestic market. Chinese students that studied overseas may take on a facilitating role as well. They can often act as a linkage due to their understanding of ethnic culture and their acquired knowledge of foreign culture and business practices.

Researchers have found that when Chinese SMEs invest internationally, they tend to partner up with local Chinese firms in the country of residence. Conversely, when larger Chinese firms seek international cooperation, factors such as technology or brand are prioritized. Thus, large corporate firms are less likely to form partnerships with local Chinese firms. They would still hire local Chinese talents, however, for their local knowledge and cultural affinity[52]. This is a logical action by SMEs, as their businesses possess comparatively fewer resources, and would need to rely more on networks to minimize information asymmetric and risks.


Europe is an excellent case for study because it possesses large stocks of Chinese OFDI, high Chinese population and is becoming increasingly popular for Chinese investors and immigrants. All these factors allow researchers to document the phenomenon in detail and allow for richer analysis of their findings. Karreman et al. have found that it is not just the population size of the Chinese diaspora that matters, but the characteristics play a huge role as well[53]. Two characteristics in particular seem to a perceptible effect on the level of Chinese OFDI. First is the education level of the Chinese community. Second characteristic is the length of settlement in the country of residence, separating the group into pre-1970 and 1970 to 2000. Their results reveal that higher education level correlate to a small degree with higher greenfield investments. On the other hand, newer generation of migrants have a stronger effect on the investment level. A possible explanation is that newer migrants maintain closer ties to their homeland in a period where China is expanding outwards. The results of this report is especially robust because it controlled for key variables such as economic embeddedness and reverse causality.

The Chinese diaspora has also benefits from relatively open regulations in the European Union. In Germany, international students are permitted to start their own business after graduation. Germany, being one of Chinese students’ favourite destination, some of the graduates have taken up the challenge and established their own companies. One of the most notable case is Caissa Touristic which found international success. The company was created in Hamburg by a Chinese graduate. As its name suggests, Caissa Touristic specialized in the tourism industry that connects China to Europe. The company staff consists of mainly overseas Chinese people as they have the skills and cultural understanding to conduct business with Chinese and German partners.

In Portugal, the Chinese community has played an active role in attracting Chinese OFDI.  Research from Neves et al. found that some overseas Chinese retained their high ranking positions in governmental organizations. The authors used the term “paradiplomacy” to describe the promotion of economic interests through these connected individuals. The authors found that some Chinese networks are built based on a specific region of origin as some provincial and municipal governments are more active in promoting economic integration and development. Some Chinese businessmen have gained titles of “informal economic ambassadors,” for their role in drawing investments from their region of origin[54]. The EUR 221 million investment by Shanghai Union Technology CO. was said to be the fruits of the economic ambassadors’ labour.

The Americas

The Americas is another region that attracts massive amounts of Chinese OFDI and sizable Chinese communities. North America, except for Mexico, is the most popular destination for Chinese investment and immigration. Latin America also attracts large investments from China, but mainly in primary industries. There are also Chinese communities scattered in different countries in the region, and are fairly concentrated in the cities. Unlike North America, the surge of Chinese investments is not accompanied by an increase in Chinese immigration. Whether the Chinese community is big or small, they still have a role to play in bridging China with the country of residence.

Canada is home to a large, vibrant and growing Chinese community.  There is also a significant amount of Chinese OFDI coming into the country. A research by Mitchell et al. reveals how the Chinese diaspora can influence investments in the region. Their studies show that overseas Chinese networks is an invaluable resource for Chinese firms going abroad. In Vancouver, the home to one of the biggest overseas Chinese community, Hong Kong property firms have relied on Chinese networks for quick access to market information. They further argued that the information shared is more particularistic and flexible, giving Chinese firms an edge over non-Chinese firms[55]. The Chinese diaspora can also contribute to investments by ways of lobbying the government. In a recent case, a rich Chinese businessman was able to speak with the Prime Minister in a fundraising event. The outspoken entrepreneur was persuading the Prime Minister Trudeau to relax regulations for Chinese investments[56].

In Cuba, where only a small community exists, the Chinese diaspora nevertheless served as intermediaries for business and government. Chinese officials visiting Cuba often goes through Chinatown and meet with the locals. Moreover, overseas Chinese help spread cultural and language in the area to the general public. Promoting cultural understanding and acceptance creates a more attractive investment climate in the city and country. In more specific ways, Chinese associations assists Chinese immigrants and businessmen with a variety of tasks. They offer services such as assisting with visa applications, finding a counter-party for businesses, coordinating meetings and ensure business is compliant with local regulations and laws. To get things done in Cuba, social connections are important, and the Chinese diaspora can provide the guanxi necessary for incoming Chinese investors.


The Chinese diaspora can also be seen as a lucrative market for Chinese companies. Chinese firms have long been able to enjoy added profits from exporting Chinese products overseas. Direct investments overseas can also be profitable, but has more risks and requires more commitment. According to business models, firms tend to export first before taking the plunge and invest overseas. Trade and investment is also inter-related as firms would invest in infrastructure to facilitate trade.

There are many cases of Chinese companies investing overseas to target the overseas Chinese communities. One recent example is CCTV’s entry into the US market. The parent company, China International Communications CO (CICC), introduced a new TV channel in the US for Chinese consumers[57]. The new channel will broadcast China-made shows to American audiences to strengthen China’s soft power and reconnect with the diaspora population. Alibaba, the e-commerce behemoth of China, is also aggressively expanding overseas. Their expansion strategies involve word-of-mouth promotions and advertisements to appeal to Chinese customers abroad[58]. Aliexpress, the platform for overseas market, had already expanded outside of Mainland China to Hong Kong, Taiwan, and Singapore. Currently, Alibaba has investments in a large number of countries and they have prioritized a few. The company is expanding rapidly through acquisitions and greenfield investments in North America, Southeast Asia and Australia, all of which are home to large Chinese communities. They have also established offices in the US, UK, France, Italy, Australia and India[59]. Furthermore, Alibaba attempts to connect with Chinese companies all over the world by collaborating with the World Chinese Business Network[60]. Alibaba’s B2B e-commerce platform enables Chinese businesses from all over the world to connect with each other. Other Chinese brands follow a business development strategy similar to Alibaba’s when expanding overseas. Xiaomi, for example, chose Singapore as the first investment destination outside of Greater China[61]. Afterwards, they have also entered markets in India, Malaysia, Indonesia, Thailand, Vietnam, and Philippines[62].

Another industry that had been rapidly expanding overseas is the banking industry. Chinese banks are opening branches all over the world to follow their clients[63]. The Bank of China (BOC) had taken the most aggressive approach and has the biggest foreign operations among the other Chinese banks. The other major banks, Industrial and Commercial Bank of China, China Construction Bank (CCB), Agricultural Bank of China (ABC) had been expanding abroad as well. The Bank of China now has 16 branches in the Americas. Most of them are located in cities with large Chinese communities such as New York’s Chinatown, Vancouver, Richmond, Calgary, Los Angeles, and Toronto[64]. The other big 3 banks of China all share establish branches in similar locations. Besides the cities mentioned above, popular destinations include Sydney, London, Singapore, and even Lima. These Chinese banks offer a variety of services to both individuals and corporations, and had tailored their products and services for Chinese customers.

Property developers are also following their Chinese customers. Dalian Wanda, Vanke, Landsea, Fuxing Huiyu Real Estate, Lelege, Greentown, and many other smaller developers had been entering overseas markets. Some, if not a majority of their projects, were aimed at Chinese buyers. There is often overlap between markets with large Chinese diaspora and markets desired by new Chinese immigrants, investors or vacationers. As a result, many of the developments occur in cities with large Chinese communities. Greentown China Holdings’ expansion plans overseas is illustrative of this phenomenon. The cities they are targeting have some of the most vibrant Chinese communities including Sydney, Melbourne, Los Angeles and San Francisco[65]. Another developer, Landsea Group had also prioritized cities with large Chinese populations. In 2014, the company announced investments of US$1 billion in the US market in 3 cities: San Francisco, Los Angeles and New York. They were not expecting all of their properties to be owned by Chinese, but they were expecting around a third would come from Chinese buyers[66]. Furthermore, investing abroad have never been easier for Chinese investors. In 2015, Auction.com partnered up with Shanghai-based Juwai.com to offer Chinese buyers real estate investments in the US that ranges from hotels to office buildings[67].

Relations with the Local Population

The influence of the diaspora is not only dependent on the size, but also their relations with the local population. Negative sentiments against ethnic Chinese are common in some parts of the world. This would dramatically undermine the ability of the Chinese community to facilitate investments and scare off potential investors from China. Businessman and organizers often fear backlash when making connections with China. The loyalty of overseas Chinese may be questioned if they maintain close ties with China.

Anti-Chinese sentiment in Southeast Asia has been a recurring problem, hampering investment and immigration from the Mainland. Just several years ago, there was a protest against China in Vietnam’s Ha Tinh province. Chinese workers and companies were targeted, leaving over a dozen dead and scores injured[68].  Similarly, Malaysia had anti-Chinese protests in 2015 in the capital of Kuala Lumpur. The protestors were unhappy about ethnic Chinese parties and politicians and their influence in Malaysian society. Effigies of Chinese politicians were burned by the protestors and barricades were set up to protect parts of Chinatown[69]. There were also discontent among Malaysian elites about Chinese investments. In a well published blog by the influential former prime minister, Mahathir Mohamad attacked the Malaysian government’s support for Chinese property investments in the southern tip of the country[70]. Cases of anti-Chinese protest or attack can be found in Indonesia, Philippines and Thailand in varying degrees. Over in East Asia, the Chinese diaspora in Japan and South Korea have the same challenges as ethnic tensions remain not far from the surface. The poor relations that China has had with these countries is a massive impediment to OFDI, resulting in depressed levels of OFDI stock.

By comparison, the overseas Chinese communities in Canada, United States, Europe, Peru and Oceania have amiable, or at least non-hostile, relationship with the local population. The president of Peru has remarked how well ethnic Chinese had integrated into Peruvian society[71]. In the United States, Canada, Australia and most of Europe, Chinese culture and traditions are respected, and even celebrated in many cases. Canada, for instance, have acknowledged the contributions and sacrifices of the Chinese communities in building the nation[72]. Although large Chinese investments into certain industries are still being viewed with skepticism, most Chinese investments were welcomed by these economies. The Chinese diaspora would not have to worry about prosecution, discrimination or have their loyalty questioned by the public or the government simply because they are doing business with Chinese partners.

Government and NGO Initiatives

The importance of overseas Chinese is becoming more apparent to the Chinese government. The World Huaqiao Huaren Businessmen and Industrialist Conference was held in 2015 by the State Council and Overseas Chinese Affairs Office. The purpose of the new organization is to leverage the talents and resources of overseas Chinese to facilitate the development of Xi’s One Belt One Road (OBOR) initiative[73]. Premier Li Keqiang has called on the overseas Chinese businessmen to serve three purposes[74]:

  1. To be “new effective forces” in China’s development.
  2. To build a “rainbow bridge” for economic cooperation
  3. To create a “new image” for Chinese entrepreneurs

Li Keqiang’s second point implies that overseas Chinese can assist with facilitating trade and investment with their country of residence. Li hopes that the Chinese diaspora can expedite the construction process for the OBOR initiative[75].

There is another world conference already, that connects overseas Chinese from all over the world. The World Chinese Entrepreneur Conventions (WCEC) was established by Singapore Chinese Chamber of Commerce and Industry as a platform to connect overseas Chinese business communities worldwide[76]. The first convention was held in 1991, and the overwhelming success of the first meeting led to the decision to hold biannual conventions in different cities around the world. Thousands of prominent Chinese entrepreneurs attend the WCEC with many foreign and Chinese politicians and influential figures in attendance as well. There are a total of 13 conventions since the inauguration in 1991, and huge contract deals usually accompany these meetings. For example, in the 8th WCEC, deals worth US$830 million were signed in South Korea[77]. The investment amount only grew over the years. In 2013, when WCEC was held in Chengdu, 214 business deals were signed that was worth a total of US$ 20 billion[78]. In a letter to the convention, Xi Jinping applauded the overseas Chinese contribution to “facilitate the communication and cooperation between China and the World[79].”

Chapter 6: Ethnicity and OFDI Correlations

The Chinese government have long recognized the Chinese diaspora massive contributions to China’s economic development and integration into the global economy. On separate occasions, both Premier Li and President Xi have urged the 45-million strong Chinese diaspora to “rejuvenate” the Chinese nation[80]. There are also ample studies by researchers that document the overseas Chinese contributions through heavy investments into China’s economy. Research, such as the ones by Professor Kriengsak, demonstrated the various ways the Chinese diaspora aided in China’s economic miracle[81]. On the contrary, the influence of the Chinese diaspora for outward direct investment has been largely ignored. This may have to do with the fact that China had traditionally been an FDI recipient rather than an FDI contributor. Moreover, the topic can be sensitive for some groups as it has the potential to incite resentments from local population or host governments. There are some noticeable changes in Chinese OFDI and Chinese migration with more and more news headlines related to the two topics. As their significance grows, it is vital to examine these two topics and how they relate in greater detail.

Aggregate Level

From an aggregate and macro level, Chinese OFDI and the dispersion of overseas Chinese have much in common. Looking at the adjusted OFDI stock in 2013 for the different regions, Asia accounts for 49 per cent, Europe 19 per cent, Africa 8 per cent, Oceania 7 per cent, and the Americas 18 per cent[82]. Meanwhile, the percentage of the overseas Chinese population in Asia stands at 73 per cent, Europe with 4 per cent, Africa with 1 per cent, Oceania with 3 per cent and the Americas with 19 per cent. Because of the long history and geographic proximity, the Chinese diaspora in Asia is especially large in Asia, being far larger than the stock of OFDI. Curiously, The Americas which also share a long history with China, albeit not as long as Asia, has the same percentage of overseas Chinese and investment stock. The percentage for Oceania is also fairly close with 7 per cent investment stock against 3 per cent of the overseas Chinese population. The greatest difference in terms of investment and population lies in Europe and Africa. Europe’s more restrictive immigration policies and the underdevelopment in the African continent may be have contributed to this divergence.

Aside from looking at the stock, it also useful to examine the flow of investments and people. In 2014, Chinese OFDI flow to the regions are as follows: Asia (50 per cent), Americas (19 per cent), Europe (17 per cent), Oceania (7 per cent) and Africa (7 per cent)[83]. The population movement of the overseas Chinese are remarkably similar: Asia accounted for 49 per cent of the growth; Americas, 29 per cent; Europe, 26 per cent.  Oceania, 6 per cent; and Africa, 9 per cent. Of course, the percentages for both categories would vary each year, sometimes to a great extent. The statistics for the population of overseas Chinese is especially prone to sampling errors and requires occasional adjustments. Looking at longer periods of time will alleviate some of the errors from the yearly fluctuations. Placing the data in a longer time span yields an unmistakable trend: The Chinese diaspora is going ever westward.

In the 1980s, China experienced a massive wave of migrants leaving the country, with the Chinese diaspora community growing by almost 6.5 million [Figure 7]. Most of these migrants are moving close by, with 85 per cent of them staying within Asia. The rest of the regions made up only a small percentage, with America being the exception, accounting for 11 per cent. There was a dramatic change in the next decade, with the Americas taking the lead. The Chinese diaspora actually shrank by 28 per cent in the 1990s. In the 2000s, Asia took the lead once again with 59 per cent, but the Americas were also popular with 23 per cent. The latest figures show that the Americas are growing in popular, both percentage-wise and in absolute number. The Chinese diaspora population in the region grew by 1.1 million, already surpassing growth in the entire 90s and 80s in half the time. Europe was experiencing similar growth, with 646,000 new overseas Chinese in 5 years, far above the previous three decades.  Oceania had seen the steadiest flow of Chinese immigrants, with a growth of 200,000 – 300,000 people for the entire survey period. Africa had remained in the margins, with minimal growth throughout the 80s, 90s and 00s. From 2010 onwards though, the region had been experiencing some robust growth, even overtaking Oceania. China’s emigration pattern had gone through a clear evolution. More and more people are choosing to immigrate to the Americas or Europe. Asia, while still at top of the charts, are losing its appeal over the decades. This related to the findings above where Asia’s proportion of Chinese OFDI has been shrinking while the other regions were growing.

Asia Americas Europe Oceania Africa Total
1980s   5,503,000          683,000       42,000       235,000          17,000   6,480,000
84.9% 10.5% 0.6% 3.6% 0.3%
1990s    (876,000)       3,350,000     379,000       249,000          33,000   3,135,000
-28% 107% 12% 8% 1%
2000s   2,384,000          947,000     304,000       301,000        101,000   4,037,000
59% 23% 8% 7% 3%

– 2015

  1,467,000       1,081,000     646,000       240,000        293,000   3,728,000
39% 29% 17% 6% 8%

Figure 8: Overseas Chinese population growth by region (Source: OCAC)[84]

Country/Economic Zone Level

From the country level, the population of overseas Chinese match closely with adjusted OFDI stock based on data from 2014. Based on the analysis in Chapter 3 and 4, a matrix can be constructed to show the relations between Chinese OFDI and overseas population [Figure 8]. On the vertical side is the Chinese diaspora population from OCOC data in 2014. If data is unavailable for any given country, CIA Factbook[85] or the respective country’s national census was consulted. Ascertaining the overseas Chinese population is as much a science as it is an art. The scale, complexity, and the ambiguity of ethnic identification had led to conflicting numbers from various sources.  Since the numbers are not exact, a range is used instead and categorized from very high to very low.  The stock of Chinese OFDI has a similar problem, as the final destination of most investments are unknown, so a range would also be used instead of exact numbers. The numbers are also adjusted based on the formula in Chapter 3 to account for the distorting effect of round-tripping and offshoring. For these reasons, putting countries into general categories would be more appropriate than deriving an investment dollar per overseas Chinese figure.

Figure 9: Overseas Chinese and OFDI Matrix [Source: MOFCOM, OCAC, CIA Factbook]

The matrix is further color coded to show whether it there is a reasonable amount of OFDI for a given population of overseas Chinese. The reds denote that it’s unreasonable; the greens denote it’s reasonable; the yellows are somewhat in between; and the intensity of the color reflects the degree of alignment. For instance, the group in the top right corner has very high Chinese OFDI and very high Chinese diaspora that is aligned with hypothesis 1, so it gets a deep green color. In the same way, the group at the bottom right corner have low OFDI and low population of overseas Chinese, which is also deep green. The most puzzling categories are the reds and yellows. The existence of these categories does not invalidate hypothesis 1. As mentioned before, the population of overseas Chinese is just one variable of Chinese OFDI out of many others. These other important considerations can explain why many of these countries diverged from the green areas.

Many of the countries that have low overseas Chinese population and medium to very high Chinese investments could be attributed to resources, politics or simply, geography. China often invests heavily in resource-rich countries such as Iran, Saudi Arabia, Mongolia and Kazakhstan to gain access to much need resources at home. For instance, a large portion of China’s OFDI stock in Kazakhstan is resource related such as the Kazakhstan-China pipeline[86]. Tight political ties between China and Pakistan may explain why there was a relatively high level of investment in Pakistan. The Sino-Pakistani diplomatic relations can trace its roots back to the 50s, and is often characterized as an “all weather friendship.”[87] China’s investment relations with African countries is a mix of both politics and resources. China had a critical role in upgrading African nations’ infrastructure and had also benefited greatly from the abundance of various resources on the continent.

Conversely, a medium or high overseas Chinese population with relatively low investment could largely be attributed to political factors. Sino-Philippine relations had been tense and mired with territorial disputes. In addition, the Philippines had traditionally been more reliant on the United States for economic, military and diplomatic support. The case is similar for Japan and South Korea who are more aligned with the United States. At times, there are open hostility between Japan and China over historical legacies. Meanwhile, racial tensions in Malaysia, Thailand, and Indonesia is also a hindrance to Chinese investment and keep it at an artificially depressed level. There are myriads of other factors that may cause under or over investment per population of overseas Chinese. Next, we look at individual countries in detail to see how the Chinse diaspora population related to Chinese OFDI.

Peru appears to be an outlier that has a large Chinese population but very low Chinese OFDI. The picture changes drastically if other sources are consulted. According to AEI’s Chinese Investment Tracker, China invested US$11.18 billion in Peru between 2005 to 2014[88], which placed it at the same level as Argentina and Venezuela. According to Center for Strategic and International Studies, Peru is only second to Brazil in terms of investments from China[89]. Just as important is the fact that China’s very first investment in Latin America was in Peru, when Shougang Group purchases Hierro Peru[90]. Ties and investment between the two countries have continued to strengthen in more recent years. The new Peruvian president’s first official visit abroad is China as he looked to develop closer ties and increase investment and trade between the two countries[91]. As the oldest and largest Chinese community in Latin America, Chinese people are well integrated into Peruvian society. Having achieved business success, Chinese-born entrepreneurs founded CAPECHI[92] – a business association to promote investment and trade with China.  Besides holding invaluable trade shows and exhibitions, the chamber also offer information access and consultation services to firms about Peru’s investment environment and opportunities.

The United States of America

The United States of America is one of the largest recipients of Chinese FDI and is also home to one of the largest and most vibrant Chinese communities. In 2014, the stock of Chinese OFDI in US stands at nearly US$76 billion or roughly 11 per cent of the total. If Hong Kong is excluded, the United States would become the number one destination for overseas Chinese investment. The population of overseas Chinese follows a similar trajectory. As of the end of 2014, there was an estimated 4.5 million people of Chinese descent in the US. Excluding the neighboring countries of China, which shared centuries old history, the US would take the top spot for this category as well. The population of overseas Chinese in America is far larger than any other country outside of Asia, with Canada being a distant second, having a population of overseas Chinese of roughly 1.6 million.

The US is the top investment destination for many countries, many of which do not have large diasporas, so it is not a unique case for China to invest heavily in the US. In fact, the very factors that may be attracting Chinese OFDI may have also attracted the Chinese immigrants to cause the diaspora population to surge. High living standards, pristine natural environment, large open markets, and excellent education opportunities are just some of the factors that make the US an unparalleled destination for both investment and living. The enduring problem of third factors causing the two variables being tested to move in tandem applies to other countries as well. The problem can be mitigated somewhat by looking at the correlations at an even deeper level and look at data from the state or county level.

The Rhodium Group and American Enterprise Institutes are two think tanks that monitors where Chinese investments end up in the United States. Data from both institutions are consistent with each other and shows a clear trend. Rhodium Group created a map of Chinese investments by value and number of deals from 2000 to 2016[93].. From this map, it is obvious that Chinese OFDI into the United States is far from uniform. Numerous states stand out as top destinations in terms of deal value, including: California, New York, Texas, Oklahoma, Kansas, North Carolina, Virginia, Illinois, Kentucky, Massachusetts, Michigan and Minnesota. In terms of number of deals, California comes out on top, followed by New York, Texas, Michigan, Illinois, North Carolina and Washington. s

According to the most recent census in 2010, the United States has 3.3 million Chinese Americans[94]. California had, by far, the largest population Chinese population with 1.3 million people. New York is second with 577,000, followed by Texas (157,000), New Jersey (134,500), Massachusetts (123,000), Illinois (104,200), Washington (69,000), Pennsylvania (85,000), Maryland (69,400), Virginia (59,800) and Ohio (51,033). It is interesting to note that the top three places for Chinese investment are exactly the same as the most popular destination for Chinese immigrants. Other states with a high Chinese population and high investments include: Washington, Illinois, Virginia, Massachusetts and New Jersey. Conversely, where Chinese population was especially low such as New Mexico, North Dakota, South Dakota, Montana, West Virginia, Wyoming, Vermont and Maine have no or very low investments from China.

The correlation is far from perfect, however. There are states with relatively low population of Chinese Americans but relatively high investment value. Five states stand out the most: Oklahoma, Kansas, Kentucky, Minnesota and Michigan. Each of these states received investments in excess of US$ 2 billion. Additionally, South Carolina, Georgia and Florida received decent amount of investments but have very low Chinese population. In the case of Michigan, the high investment was industry driven, with most the majority of the Chinese investment going into the automotive industry[95]. In the other cases, it was driven up by a few large mergers and acquisitions. As an example, Hainan Group’s acquisition of Carlson Hotels for US$ 2 billion makes up the bulk of Minnesota’s total FDI from China. Similarly, Haier’s acquisition of General Electric’s subsidiary based in Kentucky contributed US$ 5.4 billion[96] out of the US$ 9.8 billion that the state received. For Kansas, it was Dalian Wanda’s US$2.6 billion acquisition of AMC entertainment that gave the state a high investment value.


Being the largest state both in terms of Chinese OFDI and Chinese American population, California deserves a closer analysis.  A study by Asia Society of Chinese investments have found that Chinese investments tend to be concentrated in areas with large Chinese population[97]. They have found that based on the number of deals and value, the Los Angeles-Long Beach-Santa Ana metropolitan area, takes the number one spot and also possesses the largest Chinese population. The San Francisco-Oakland-Fremont metropolitan area takes the second place in terms of number of deals and has the highest proportion of Chinese people to total population. The report has also found that Chinese firms have had the most successful investments in California compared to the other states. This can be partly attributed to the cultural familiarity or personal networks and the robust human capital found in the Golden State.

Real Estate

Investments in real estate is becoming an ever increasing source of OFDI for China. According to another report by Asia Society[98], the biggest hubs that also have a large Chinese population, are favorites among Chinese investors. Three cities – New York, Los Angeles, and San Francisco – make up 70 per cent of the transaction volume of commercial real estate from 2010 to 2015. Other big markets include Houston, Chicago, Silicon Valley, Orange County, and Seattle, which all have sizable Chinese-American populations. On a state level, the destination of commercial real estate investment mirrors that of the general investment portfolio shown above. California, New York, Texas and Illinois received the most investments from China.


When it comes to Chinese communities and investment, Canada shares many commonalities with the United States. Even though Canada has fewer ethnic Chinese in absolute terms, it accounts for a larger percentage of the total population. People of Chinese ancestry makes up  approximately 4.5 per cent in Canada[99], while the United States has roughly 1 per cent. The population of ethnic Chinese are concentrated on a few provinces. The most populous is Ontario, followed by British Columbia and Alberta and Quebec. Within these provinces, Chinese communities are concentrated in world famous cities like Toronto, Vancouver, Montreal and Calgary[100]. The cultural influence of the overseas Chinese is readily observable in these cities, with large Chinatowns and businesses tailored to Chinese consumers.

According to the China Institute of University of Alberta, Chinese investments are fairly concentrated in a few provinces[101]. By number of deals, British Columbia, often dubbed the gateway to Asia for its strategic location, is the top destination for Chinese investment, with 245 deals to date. Ontario takes the second place with 164 deals followed by Alberta (111) and Quebec (41) [Figure 10]. British Columbia and Alberta switch places if ranking is based on the investment value. Chinese investments into Alberta are driven primarily back oil, which is abundant in the province. There is more diversity in British Columbia and Ontario, where Canada investment
significant investments go to consumer products and services and real estate.  Additionally, private enterprises contribute larger proportions compared to Alberta where around 80 per cent of the investments come from SOEs[102].

Figure 11: Chinese Investments in Canada [Source: China Institute, University of Alberta]

The two most popular cities for Chinese immigrants and investments, Toronto and Vancouver, continued to attract large investments from China. In 2016, China surged ahead to become the largest foreign investors in Canada, surpassing the United States and Europe[103]. A total of CA$1.3 billion was invested in commercial real estate in the first of 2016. Anbang’s purchase of the Bentall center in Vancouver accounted for CA$1 billion of the total[104]. Toronto also attracted huge investments such as the CA$110 million lease purchase of the HSBC building in 2015[105]. The manager director of Cushman & Wakefield has remarked that Chinese investors “see anything around Toronto as something they like” which are assisted by the local Chinese Mandarin-speaking agents[106]. According to the co-founder of Juwai.com, a website that connects Chinese homebuyers to the overseas market, most Chinese buyers prefer areas where an immigration community already exists[107].


Europe is an important region for Chinese immigrants and Chinese investments alike. The United Kingdom, France, Russia and Germany, all received high levels of FDI from China and possess substantial overseas Chinese populations. In a report published by Karreman et al., they have found that the location choices of Chinese firms correlate well with the size of the overseas Chinese population[108]. Specifically, the probability of greenfield investments is higher in countries with a higher stock of overseas Chinese.  On the regional level, the presence of a sizable Chinese community also increases the probability of greenfield FDI.

Interviews and questionnaires from Schuller and Zhou provides additional evidence and rationale for Chinese firms to enter markets with overseas Chinese[109]. An interview with the head of the education department of the Chinese embassy in Beijing, Mr. Jiang, stated that Chinese companies “openly and enthusiastically welcome [Chinese] graduates”. The students help these Chinese companies recruit qualified people or take on personnel management roles. Chinese association also play the critical role of disseminating information. Trade shows and exhibitions are some of the most common ways for the association to showcase the opportunities available in a given city or region. It provides excellent opportunities for firms to form partnerships and build contact and networks.

A study of Chinese firms entering the European market provides additional clues on how China’s strategies investing abroad. Haiyan Zhang et al. have found that of more than 7000 Chinese companies analyzed in their study, a majority of them have ethnic Chinese partners[110] for their joint ventures. To be more precise, 50 per cent of the joint venture partners are other Mainland China companies and 26 per cent are overseas Chinese partners. Only 16 per cent are non-Chinese partners and 8 per cent are considered a mixed partnership of Chinese and non-Chinese. Remarkably, it is not state-owned enterprises nor private enterprises that favour partnerships with ethnic Chinese. In fact, it is the opposite as a majority of SOEs and POEs preferring to partner with non-Chinese firms or mixed partnership. The ones that favour partnership with ethnic Chinese are individual, with 82 per cent of the firms have Chinese or overseas Chinese partners. This rate is much higher than SOEs at 27.8 per cent and private enterprises at 28.2 per cent. It is important to note that individual and family investors make up the majority of the firms in the report. Of the 7,148 firms in the sample, 82 per cent are individual and family investors, 3 per cent are SOEs, and 15 per cent are private enterprises. Even though SOEs and large POEs grab all the headlines, they are actually vastly outnumbered by individual and family investors.

Research conducted by KPMG also corroborate with these findings[111]. Their report reveals that Chinese firms would consider factors such as presence of overseas Chinese, number of Chinese students, and the level of Chinese tourism, to be important factors for investment.

Chapter 7: Conclusion

China is a relatively new player in the foreign direct investment domain – despite all the news headlines, China is ranked number 11 in terms of outward FDI stock in 2016 behind the much smaller countries like Ireland, Japan, France and a few others[112]. Nevertheless, the rise in Chinese OFDI is astonishing on many levels. China’s outward investment had been insignificant for most of history, and only experienced meaningful growth post 2004. Growth in OFDI exploded around the time of the great financial crisis and its upward momentum remains strong even today.

As an ancient civilization, the Chinese diaspora has ancient roots dating back many centuries in some cases. Although away from the homeland, overseas Chinese remained connected to China, directly or indirectly. The overseas Chinese community exerts influence on China, culturally, politically, and economically to varying degrees and vice versa. The role of the Chinese diaspora in bringing about China’s economic miracle through FDI has been largely acknowledged by scholars and politicians alike. Their role in OFDI as part of China’s next economic transformation is much less certain and a ripe topic for interdisciplinary study with important implications for businesses and governments.

A rough picture of how Chinese diaspora links to Chinese outward investment is created by cross-tabulating the data of Chinese OFDI from MOFCOM and the data of Chinese diaspora population around the world from OCAC. Results show that most countries and regions with a large Chinese population tend to have higher levels of Chinese investments. This correlation holds even at the provincial and state level. It makes economic sense for many firms to establish their overseas businesses in communities with Chinese presence. China, being a new entrant in the international market, Chinese firms often lack international experience. It is a way for these firms to hedge their risks by first spreading to regions where there is cultural and political support from the local population. There are notable exceptions, however, with some countries receiving high levels of Chinese investment without having a significant Chinese community. These countries are generally resource-rich, either in energy like Saudi Arabia or in mining like Mongolia. Having a large market and geographic proximity are also factors that contribute to higher Chinese investments, as is the case of India.

On the flip side, various factors inhibit Chinese investments, keeping the stock of Chinese OFDI at depressed levels. Foreign direct investments are always underpinned by politics and diplomacy between the two countries. The historical legacies of China with Japan and South Korea endure into the 21st century. The two countries, with substantial Chinese communities and geographically close, have relatively low stocks of Chinese OFDI. Related to this issue is ethnic tension, which can be found throughout Southeast Asia. Vietnam, Philippines, Thailand, Malaysia have some of the largest Chinese diaspora in the world, yet their stock of Chinese OFDI are beaten by countries with smaller Chinese communities and markets. There is a lot of pressure on the Chinese community to conform and break ties with their homeland, as their loyalty may be questioned.

It is not necessarily the size of the Chinese community that matters most, but the characteristic of the community also plays a part. One of the crucial characteristics that affect investment levels is the age of the community itself. Newer immigrants, many of whom maintain close ties with their motherland, tend to have a greater effect on attracting Chinese investments. Conversely, older generations of ethnic Chinese have little to no relational connections with China. This may also help explain why Southeast Asia has lower than expected levels of Chinese OFDI because their Chinese diaspora is one of the oldest in the world. Another key factor is the level of education of the overseas Chinese population. Ethnic Chinese with higher levels of education are linked to higher levels of investment. Ethnic Chinese with higher education are better equipped to take advantage of business opportunities and create trade and investment between their COR and China.

Various cases illustrate that Chinese diaspora may not just attract investments from China, but attracts investments from other countries with a large Chinese diaspora as well. Several associations, such as WCEC, strive to connect ethnic Chinese entrepreneurs from countries all over the world. There are also cases of ethnic Chinese business networks in Europe that facilitates cross-border investments and trade. Furthermore, the influence of overseas Chinese varies depending on the type of Chinese enterprise. Large SOEs are found to be less reliant on the local Chinese communities and prefers foreign partners. Meanwhile, POEs, especially smaller ones, prefer working with other Chinese enterprises and are more reliant on the local Chinese networks. Such findings have enormous implications of Chinese OFDI in the future. China’s emergence as a major investor is a relatively new phenomenon. Newer still is the growing significance of Chinese POEs and the focus moving from extractive and resource based industries to service and technology industries. As such, the potential of the Chinese diaspora is yet to be seen.

FDI is a massive and incredibly complex subject, with multitudes of business, civil, social, cultural, governmental factors at play. Scholars have traditionally focused on governmental and market factors on FDI and rightly so – they’re the most important variables to consider for businesses big and small. What my thesis aims to do is not replace their theories but to augment it by adding a social dimension. Scholars have long recognized the unique Chinese business culture but never adequately connected it with its internationalization process. There remain large gaps in the literature regarding Chinese diaspora’s effect on China’s outward direct investments. Further studies of this subject at both national and provincial levels could yield invaluable insights into how business and culture are related in the Chinese context where personal relationships are of paramount importance.


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Appendix 1: Overseas Chinese Population by Region

Asia Americas Europe Oceania Africa Total
1980        22,391,000        1,558,000                     525,000         105,000        75,000        24,654,000
1981        23,202,000        1,613,000                     544,000         148,000        77,000        25,584,000
1982        23,631,000        1,663,000                     551,000         168,000        79,000        26,092,000
1983        23,665,000        1,705,000                     567,000         179,000        80,000        26,196,000
1984        25,023,000        1,903,000                     581,000         202,000        74,000        27,783,000
1985        25,300,000        1,955,000                     583,000         214,000        72,000        28,124,000
1986        25,799,000        2,044,000                     585,000         214,000        73,000        28,175,000
1987        26,226,000        2,167,000                     532,000         326,000        74,000        29,325,000
1988        27,161,000        2,182,000                     552,000         331,000        90,000        30,316,000
1989        27,894,000        2,241,000                     567,000         340,000        92,000        31,134,000
1990        27,664,000        2,663,000                     589,000         356,000        99,000        31,371,000
1991        29,484,000        3,356,000                     559,000         392,000        84,000        33,875,000
1992        30,635,000        3,731,000                     646,000         404,000        94,000        35,510,000
1993        31,054,000        3,802,000                     757,000         407,000      108,000        36,128,000
1994        31,752,000        3,976,000                     869,000         432,000      115,000        37,144,000
1995        32,911,000        4,261,000                     886,000         487,000      119,000        38,664,000
1996        32,984,000        4,542,000                     899,000         498,000      119,000        39,042,000
1997        26,912,000        4,730,000                     938,000         535,000      123,000        33,238,000
1998        27,071,000        5,020,000                     945,000         564,000      126,000        33,726,000
1999        26,788,000        6,013,000                     968,000         605,000      132,000        34,506,000
2000        27,363,000        5,959,000                     955,000         631,000      137,000        35,045,000
2001        27,821,000        6,124,000                     973,000         745,000      137,000        35,800,000
2002        28,353,000        6,501,000                     983,000         742,000      144,000        36,722,000
2003        28,985,000        6,615,000                     987,000         764,000      154,000        37,505,000
2004        29,344,000        6,807,000                  1,003,000         775,000      154,000        38,083,000
2005        29,437,000        6,931,000                  1,022,000         797,000      155,000        38,342,000
2006        29,803,000        6,835,000                  1,039,000         866,000      155,000        38,698,000
2007        29,561,000        6,838,000                  1,144,000         868,000      219,000        38,629,000
2008        29,589,000        6,781,000                  1,189,000         910,000      217,000        38,688,000
2009        29,747,000        6,906,000                  1,259,000         932,000      238,000        39,082,000
2010        29,815,000        7,255,000                  1,317,000         945,000      236,000        39,568,000
2011        30,041,000        7,498,000                  1,565,000         955,000      249,000        40,307,000
2012        30,723,000        7,690,000                  1,608,000      1,066,000      270,000        41,357,000
2013        30,656,000        7,903,000                  1,696,000      1,129,000      401,000        41,784,000
2014        31,008,000        8,105,000                  1,756,000      1,169,000      466,000        42,504,000
2015        31,282,000        8,336,000                  1,963,000      1,185,000      529,000        43,296,000

Appendix 2: 2014 MOFCOM Data of Chinese OFDI Stock and Adjusted Number

(40% of Hong Kong stock are round-tripped; 30% offshored; other tax havens are distributed evenly to other country on a weighted-basis)

Official Official Adjusted
Hong Kong 509919.83 152975.949
United Kingdom 12804.65 25546.18316
Russia 8694.63 17346.40232
British Virgin Island 49320.41 0
Cayman Islands 44236.72 0
United States 38010.97 75834.57586
Australia 23882.26 47646.79927
Luxembourg 15666.77 0
Germany 5785.5 11542.48204
Singapore 20639.95 41178.1613
Indonesia 6793.5 13553.5134
Vietnam 2865.65 5717.174603
Malaysia 1785.63 3562.458251
Mongolia 3762.46 7506.374036
Myanmar 3925.57 7831.790032
Thailand 3079.47 6143.760638
Saudi Arabia 1987.43 3965.063535
Iran 3484.15 6951.125885
Peru 907.98 1811.484374
Pakistan 3736.82 7455.220421
Canada 7789.08 15539.76597
Phillippines 759.94 1516.134094
Kazakhstan 7541.07 15044.96846
Japan 2547.04 5081.525099
South Korea 2771.57 5529.478343
France 8444.88 16848.13339
South Africa 5954.02 11878.69137
Italy 719.69 1435.832495
New Zealand 962.41 1920.076077
Spain 424.53 846.9674015
Sweden 3012.92 6010.988677
Norway 5223.5 10421.25226
Netherlands 4194.08 8367.486489
Angola 1214.04 2422.095739
United Arab Emirates 2333.45 4655.397929
Cambodia 3222.28 6428.676698
Panama 204.93 408.8498565
India 3407.21 6797.625138
Laos 4490.99 8959.842957
Argentina 1791.52 3574.209217
Venezuela 2493.23 4974.17034
Brazil 2832.89 5651.816084
Zimbabwe 1695.58 3382.802126
Zambia 2271.99 4532.780879
Sudan 1747.12 3485.628074
Algeria 2451.57 4891.055691
Ghana 1056.69 2108.171351
DR Congo 2168.67 4326.650165
Nigeria 2323.01 4634.56939
Bermuda Islands 2151.44 4292.275095
Others 33150.73 66138.05301
Total 882642.42 678674.488

[①] Malgorzata Jaworek, “Transnational Corporations in the World Economy: Formation, Development and Present Position,” Copernican Journal of Finance & Accounting 4, no. 1. (2015): 55

[②] UNCTAD, World Investment Report 2015, 5-6.

[③] Ibid.

[④] OECD, Investment News, March 28, 1-2

[⑤] S.R, R.L.W, S.A, “Outward and Upward,” The Economist, June 27, 2014, http://www.economist.com/blogs/graphicdetail/2014/06/daily-chart-20 (November 4, 2016)

[⑥] Shannon Tiezzi, “China invests in the world,” The Diplomat, June 24, 2015, http://thediplomat.com/2015/06/china-invests-in-the-world/ (accessed November 4, 2016)

[⑦] Lyu, Chang, “OFDI led for the first time by private firms,” The State Council The People’s Republic of China, September 23, 2016, http://english.gov.cn/state_council/ministries/2016/09/23/content_281475449151124.htm (accessed November 3, 2016)

[⑧] Ibid.

[⑨] Richard Cooper, “Upbeat Outlook for China’s Outbound Investments,” Caixin, January 8, 2016, http://english.caixin.com/2016-08-01/100973084.html (accessed November 1, 2016)

[⑩] Lihuan Zhou and Denise Leung, “China’s Overseas Investments, Explained in 10 Graphics,” World Resources Institute, January 28, 2015, http://www.wri.org/blog/2015/01/china%E2%80%99s-overseas-investments-explained-10-graphics (accessed October 20, 2016)

[⑪] Ibid.

[⑫] UNCTAD, “Foreign Direct Investment (FDI),” United Nations Conference on Trade and Development, http://unctad.org/en/Pages/DIAE/Foreign-Direct-Investment-(FDI).aspx (accessed November 10, 2016)

[⑬] Kevin Yao, “China offers fresh support for outbound investment,” Reuters, December 24, 2014, http://www.reuters.com/article/us-china-economy-investment-idUSKBN0K20S120141224 (accessed November 10, 2016)

[⑭] Karl Sauvant, “China’s regulatory framework for outward foreign direct investment,” China Economic Journal 7, no. 1 (2014): 141-163

[⑮] Ibid.

[⑯] Mark Wang, “The motivations behind China’s government initiated industrial investments overseas,” Pacific Affairs 75, no. 2 (2002): 187-206

[⑰] Ibid.

[⑱] Yali Wang, “Motivations of Chinese outward direct investment: The sector perspective,” JSSC 29 (2015): 698-721

[⑲] Chris Alden, “A profile of the operations of Chinese multinationals in Africa,” South African Journal of International Affairs 13, no. 1 (2010): 83-96

[⑳] Ping Deng, “Outward investment by Chinese MNCs: Motivations and implications,” Business Horizons 47, no. 3 (2004): 8-16)

[21] Wang, “The motivations behind China’s government initiated industrial investments overseas,” 195.

[22] ibid

[23] Tobias Brink, “Chinese firms ‘going global’: Recent OFDI trends, policy support and international implications,” International Politics 52, no. 6, (2015): 666-683

[24] Ibid.

[25] United States Government, Congressional Research Service, China’s Economic Rise: history, trends, challenges, and implications for the United States, October 21, 2015

[26] Xiaofei Li, China’s outward foreign Investment: A political perspective (Maryland, University Press, 2010), 13

[27] Ibid.

[28] Dilip Das, China’s outbound Foreign Direct Investment: Sources of Growth and Transformation, August 2014 (Bloomington: RCCPB, 2014)

[29] Brink, “Chinese firms ‘going global’: Recent OFDI trends, policy support and international implications,” 2

[30] Ibid.

[31] Maslow’s hierarchy of needs is a theory about human motivation. It posits that there is different level of needs, and one can go up each level by satisfying a level from below. The bottom levels are more basic, such as safety and physiological, and more aspirational as it goes up.

[32] Daniel Haberly and Dariusz Wojcik, “Tax Havens and the Production of Offshore FDI: An Empirical Analysis,” SSRN Electronic Journal 13, no. 2 (April 2013): 1-24.

[33] Geng Xiao, Round-Tripping Foreign Direct Investment and the People’s Republic of China, (Tokyo: Asian Development Bank Institute, 2004).

[34] IMF, “Offshore Financial Centers,” IMF: International Monetary Fund, June 23, 2000, https://www.imf.org/external/np/mae/oshore/2000/eng/back.htm#II, (Accessed 2 January, 2017)

[35] Nargiza Salidjanova, Going Out: An Overview of China’s Outward Foreign Direct Investment, (United States: U.S.-China Economic & Security Review Commission, 2011).

[36] MOFCOM, “Statistics,” Ministry of Commerce, http://english.mofcom.gov.cn/article/statistic/, (Accessed 3 January 2017)

[37] Janne Suokas, “​China’s Outbound Investment Hit New Record in 2015,” Gbtimes.com, September 22, 2016, http://gbtimes.com/business/chinas-outbound-investment-hit-new-record-2015, (Accessed 2 January 2017)

[38] MOFCOM, “Statistics.”

[39] Lyu Chang, “ODI Led for First Time by Private Firms,” The State Council of the People’s Republic of China, September 23, 2016, http://english.gov.cn/state_council/ministries/2016/09/23/content_281475449151124.htm, (Accessed 4 January 2017)

[40]  Iris Jin and Valentine Ostaszewski, “Differing Methodologies Causing Stark Discrepancies in Chinese and Canadian FDI Statistics,” Asia Pacific Foundation of Canada, June 21, 2016, https://www.asiapacific.ca/blog/differing-methodologies-causing-stark-discrepancies-chinese, (Accessed 3 January 2017)

[41] EY Knowledge, “Riding the Silk Road: China sees outbound investment boom,” 2015,

[42] Overseas Community Affairs Statistics, “Overseas Community Affairs Statistics,” OCAC, Republic of China (Taiwan), December 6, 2016, http://www.ocac.gov.tw/OCAC/Eng/Pages/VDetail.aspx?nodeid=414&pid=336264. (Accessed 3 January 2017)

[43] Ibid.

[44] US Department of State, “Immigrant Visa Statistics,” US Department of State, https://travel.state.gov/content/visas/en/law-and-policy/statistics/immigrant-visas.html, (Accessed February 3, 2017)

[45] Adrian H. Hearn, Diaspora and Trust: Cuba, Mexico and the Rise of China (Duke University Press, 2016).

[46] Baja Post, “Chinese Firm Confirms $387.5 million pesos Investment in Baja California,” Baja Post, thebajapost.com/2015/08/19/chinese-firm-confirms-387-5-million-pesos-investment-in-baja-california/, (Accessed 7 January 2017)

[47] China Knowledge, “Geely to Set Up JV in Mexico,” China Knowledge, June 24, 2008, http://www.chinaknowledge.com/Newswires/News_Detail.aspx?type=1&NewsID=16056.

[48] Margot Schuller and Yun Schuler – Zhou, Chinese Investment Strategies and Migration – Does Diaspora Matter? A Case Study on Germany, (Badia Fiesolana: European University Institute, 2013).

[49] Henry W. Yeung, “The Firm as Social Networks: An Organisational Perspective,” Growth and Change 36, no. 3 (2005): 307-328

[50] Margot Schuller and Yun Schuler – Zhou, Chinese Investment Strategies and Migration – Does Diaspora Matter?, (Badia Fiesolana: European University Institute, 2013).

[51] Yin-Wong Cheung and Xingwang Qian, “EMPIRICS OF CHINA’S OUTWARD DIRECT INVESTMENT,” Pacific Economic Review 14, no. 3 (2009): 312-341.

[52] Frank N. Pieke and Tabitha Speelman, Chinese Investment Strategies and Migration: Does Diaspora Matter, (Netherlands: Migration Policy Centre, 2013).

[53] Bas Karreman, Martijn J. Burger, and Frank G. Van Oort, “Location Choices of Chinese Multinationals in Europe: The Role of Overseas Communities,” Economic Geography 93, no. 2 (2016): 131-161

[54] Miguel S. Neves and Maria B. Rocha-Trindade, “Diasporas and globalisation – The Chinese business community in Portugal and the integration of China into the world economy,”Migracoes Journal, no. 3 (October 2008): 155-179.

[55] Henry W. Yeung and Kris Olds, “Globalising Chinese Firms: Where are They coming from? Where are They Headed?,” in Globalization of Chinese Business Firms (New York: St. Martin’s Press, 2000), 1-28

[56] Robert Fife and Steven Chase, “Influential Chinese-Canadians Paying to Attend Private Fundraisers with Trudeau,” The Globe and Mail, December 2, 2016,

[57] Louise Lucas, “CCTV’s Commercial Arm Targets Chinese Diaspora,” Financial Times, December 4, 2016,

[58] Lulu Y. Chen, “Alibaba Taps Chinese Diaspora As Global Amazon Battle,” Bloomberg, September 11, 2014, https://www.bloomberg.com/news/articles/2014-09-11/alibaba-taps-chinese-diaspora-as-global-amazon-battle/ (January 7 2017).

[59] Alibaba Group, “Our Offices,” Alibaba Group, http://www.alibabagroup.com/en/contact/offices.

[60] http://english.wcbn.com.sg/index.cfm?GPID=2 (accessed January 7, 2017)

[61] Eileen Yu, “Xiaomi Kicks off Global Expansion with Singapore Launch,” ZDNet, February 19, 2014, http://www.zdnet.com/article/xiaomi-kicks-off-global-expansion-with-singapore-launch/ (accessed January 1 2017)

[62] Justin Springham, “Xiaomi Targets 10 New Countries in Global Expansion,” Mobile World Live, April 23, 2014, https://www.mobileworldlive.com/devices/news-devices/xiaomi-targets-10-new-countries-global-expansion/ (Accessed January 16 2017).

[63] Fan Yu, “Follow the Money: Chinese Banks on Course for Global Expansion,” The Epoch Times, October 9, 2016, http://www.theepochtimes.com/n3/2169046-follow-the-money-chinese-banks-on-course-for-global-expansion/ (Accessed January 16 2017).

[64] Bank of China, “Bank of China America Branches,” Bank of China,  http://www.boc.cn/en/aboutboc/ab6/200812/t20081216_494260.html (accessed January 16, 2017).

[65] Summer Zhen, “Greentown the latest Chinese developer to expand overseas despite stricter capital controls,” SCMP, January 12, 2017, http://www.scmp.com/business/article/2061211/greentown-latest-chinese-developer-expand-overseas-despite-stricter-capital (Accessed January 17 2017).

[66] Tim Logan, “Chinese builder Landsea to invest $1 billion in U.S. housing market,” Los Angeles Times, September 4, 2014, http://www.latimes.com/business/la-fi-chinese-home-builder-20140905-story.html (Accessed January 2 2017).

[67] Heather Perlberg, “Auction.com to Market U.S. Real Estate to Chinese Buyers,” Bloomberg, May 20, 2015, https://www.bloomberg.com/news/articles/2015-05-20/auction-com-to-market-u-s-real-estate-to-chinese-buyers (Accessed January 3 2017).

[68] Kate Hodol and Jonathan Kaiman, “At least 21 dead in Vietnam anti-China protests over oil rig,”The Guardian, May 15, 2014, World

[69] Steve Mollman, “The politics behind Malaysia’s recent anti-Chinese rally,” Quartz, September 16, 2015,

[70] Financial Times, “Malaysia backlash over vast Chinese development,” Financial Times, January 16, 2017, Politics.

[71] Johnny Montalvo and Meng Kexin, ““Let Us Unite!” – An Interview with Peruvian President Pedro Pablo Kuczynski,” China Today, October 31, 2016, Special Report.

[72] Anthony B. Chan, “Diverse Communities,” inChinese Canadians (The Canadian Encyclopedia, 2013), accessed February 16, 2017, http://www.thecanadianencyclopedia.ca/en/article/chinese-canadians/

[73] Leo Suryadinata, “Why have two world Chinese entrepreneur conferences?,” The Straits Times, September 2, 2015, Opinion

[74] Leo Suryadinata, The Rise of China and the Chinese Overseas: A Study of Beijing’s Changing Policy in Southeast Asia and Beyond (Singapore: ISEAS Publishing, 2017), 154-160.

[75] Ibid

[76] World Chinese Business Network, “About WCEC,” WCBN,  http://english.wcbn.com.sg/index.cfm?GPID=3 (accessed January 16, 2017).

[77] Xinhua, “Convention enhances ties between S.Korean, Chinese entrepreneurs,” Xinhua News, October 10, 2005

[78] Aoxue Li, “Deals worth billions signed at global convention,” China Daily USA, September 27, 2013, Business

[79] Chen Tian, “Chengdu on the rise,” Global Times, September 29, 2013, Business

[80] Xinhua News, “Xi urges all Chinese to contribute to national rejuvenation,” Xinhua News, February 17, 2017,

[81] Kriengsak Chareonwongsak, The Global Chinese Diaspora – Creating Wealth, Contributing to National Development, (Harvard University, 2012).

[82] Alicia Garcia-Herrero, Le Xia, and Carlos Casanova, Chinese Outbound Foreign Direct Investment: How much goes where after round-tripping and offshoring, (Hong Kong: BBVA Research, 2015).

[83] Data retrieved from MOFCOM’s 2014 Statistical Bulletin of China’s Outward Foreign Direct Investment and are adjusted for offshoring and round-tripping

[84] Overseas Community Affairs Statistics, “Overseas Community Affairs Statistics,” OCAC, Republic of China (Taiwan), December 6, 2016

[85] CIA, “The World Factbook,” Central Intelligence Agency,  https://www.cia.gov/library/publications/the-world-factbook/ (accessed January 16, 2017).

[86] Xinhua, “Kazakhstan-China oil pipeline opens to commercial operation,” Xinhua News, July 12, 2006, Business.

[87] Xinhua, “China, Pakistan vow to further deepen all-weather friendship,” Xinhua News, May 25, 2016, World

[88] American Enterprise Institute, “China Global Investment Tracker,” AEI and The Heritage Foundation, https://www.aei.org/china-global-investment-tracker/ (accessed January 16, 2017).

[89] Center for Strategic & International Studies, “Does China Dominate Global Investment?,” CSIS,  http://chinapower.csis.org/china-foreign-direct-investment/ accessed January 16, 2017.

[90] Barbara Kotschwar, Theodore Moran, and Julia Muir, “Do Chinese Mining Companies Exploit More?,” Americas Quarterly, 2011,

[91] Johnny Montalvo and Meng Kexin, ““Let Us Unite!” – An Interview with Peruvian President Pedro Pablo Kuczynski,” China Today, October 31, 2016, Special Report.

[92] CAPECHI, “Camara De Comercio Peruano China: About Us,” CAPECHI, accessed January 16, 2017,

[93] Rhodium Group, “China Investment Monitor,” Rhodium Group, http://rhg.com/interactive/china-investment-monitor (accessed January 16, 2017)

[94] US Census, “2010 Census,” Census.gov, https://www.census.gov/2010census/ (accessed February 16, 2017)

[95] American Enterprise Institute, “China Global Investment Tracker,” AEI and The Heritage Foundation, https://www.aei.org/china-global-investment-tracker/ (accessed January 16, 2017).

[96] Laurie Burkitt, Joann S. Lublin, and Dana Mattioli, “China’s Haier to Buy GE Appliance Business for $5.4 Billion,” The Wall Street Journal, January 15, 2016, Business

[97] Daniel H. Rosen and Thilo Hanemann, Chinese Direct Investment In California, (San Francisco: Asia Society, 2012).

[98] Kenneth Rosen et al., Breaking Ground: Chinese Investment in U.S. Real Estate, (San Francisco: Asia Society, 2016),

[99] Statistics Canada, “Ethnocultural Portrait of Canada Highlight Tables, 2006 Census,” Stat Can,  http://www12.statcan.ca/census-recensement/2006/dp-pd/hlt/97-562/index.cfm?Lang=E (accessed January 16, 2017)

[100] Ibid.

[101] University of Alberta, “China-Canada Investment Tracker,” China Institute,  https://www.chinainstitute.ualberta.ca/tracker_lite (accessed January 16, 2017)

[102] Ibid.

[103] CBC News, “Chinese bought $1.3B of Canadian commercial real estate this year,” CBC News, June 30, 2016, Business

[104] Ibid

[105] Garry Marr, “Chinese investors scoop up Vancouver and Toronto office towers, as more eye commercial market,” Financial Post, March 1, 2015, Business

[106] Ibid.

[107] Carolyn Ireland, “Toronto passes Vancouver as focus of Chinese investors,” The Globe and Mail, November 26, 2015, Real Estate.

[108] Bas Karreman, Martijn J. Burger, and Frank G. Van Oort, “Location Choices of Chinese Multinationals in Europe: The Role of Overseas Communities,” Economic Geography 93, no. 2 (2016): 131-161

[109] Margot Schuller and Yun Schuler – Zhou, Chinese Investment Strategies and Migration – Does Diaspora Matter? A Case Study on Germany, (Badia Fiesolana: European University Institute, 2013).

[110] Haiyan Zhang, Zhi Yang, and Daniel Van Den bulcke, The European landscape of Chinese enterprises: An analysis of corporate and entrepreneurial firms and the role of the ethnic communities, (Antwerp: Antwerp Management School, 2013).

[111] KPMG, Chinese Outbound Investment in the European Union, (European Chamber of Commerce, 2013).

[112] CIA, “Stock of Direct Foreign Investment – Abroad,” Central Intelligence Agency, December 2016, https://www.cia.gov/library/publications/the-world-factbook/rankorder/2199rank.html.

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