omniture

Hinrich Foundation Releases Findings of Ground-breaking Researchon Foreign Direct Investment, Offering New Perspectives On International Trade

New study conducted by Professor Michael J. Enright uses China as a case study to illuminate the full impact and benefits of FDI
The Hinrich Foundation
2016-11-15 12:00 2180

HONG KONG, Nov. 15, 2016 /PRNewswire/ -- The Hinrich Foundation, a non-profit organization which aims to promote sustainable global trade, is announcing the findings of a major project on the impact of Foreign Direct Investment (FDI) in China. The study was sponsored by the Hinrich Foundation and directed by Professor Michael J. Enright, a leading expert on international competition and strategy. It uses China as a case study to analyze the impact of FDI and illuminate the mutually beneficial partnership between investing companies and host economies. The results are reported in Enright's recently published book, Developing China: The Remarkable Impact of Foreign Direct Investment, which was also supported by the Hinrich Foundation. (Published by Routledge)

The study takes a multi-faceted approach -- which includes tracing the evolution of China's policies toward foreign investment, compiling key facts and figures, reviewing existing academic work and preparing various company and city case studies -- to showcase a wide range of economic benefits to the local economy. The project involved a first of its kind economic impact analysis of foreign investment on China's economy. The results indicate a substantially greater impact of foreign investment and foreign invested enterprises (FIEs) than what is generally understood.

"China's experience with FDI shows that foreign investment can be enormously beneficial to host economies," Professor Enright said of the project. "The multi-faceted approach provides a more comprehensive view of FDI and the impact it has had on the country than what is generally available. We believe the results are highly informative for policymakers, foreign-invested corporation managers, chambers of commerce, and communities elsewhere in the world."

Key findings from the book include:

  • China's approach toward foreign investment has followed a step-by-step approach designed to gain the benefits of foreign investment while ensuring that the Chinese Government has retained control of the process and consistent with China's evolving administrative capacity.
  • While inward FDI flows account for a small portion of total investment in China, the economic impacts of foreign investment, the operations of FIEs, and the supply chains of FIEs accounts for roughly 33% of China's GDP and 27% of China's employment.
  • Foreign companies have also contributed to modernization of Chinese industries, creating suppliers and distributors, developing and transferring technology, bringing advanced management and business practices, linking China to world markets, improving the financial system, introducing sustainability and corporate social responsibility best practices, and providing inputs into the policy making process.
  • Foreign companies have been instrumental in developing several of the most important industries in China, such as the electronics and auto industries, and have contributed greatly to the infrastructure and urban development in China.
  • Case studies of Shenzhen, Shanghai, Tianjin, and Chongqing show that not only have foreign companies been instrumental in the development of these cities, but that major initiatives for the future also involve attracting foreign investment.

The study, along with Enright's book, provide insights relevant to:

  • Policymakers -- The book describes the thoughtful approach taken towards foreign investment by the Chinese government and serves as a reminder of the critical role that foreign investment has played in China's development to date and the important role it could play in the future.
  • Investing Companies -- The study provides foreign investing companies with a framework and tools to better quantify and describe the benefits they bring to host countries in order to "make their case" in a world in which foreign investment is increasingly challenged. It also highlights the fact that foreign investment can be mutually beneficial to investing companies and host countries.
  • Developing Countries -- The study provides a compelling example of a country that has reaped the benefits of foreign investment while minimising the potential negative effects, a framework and tool to better assess the impact of foreign investment on their own economies, and an understanding that foreign investment will only help a country meet its economic objectives if it is also beneficial to investing companies.

"Foreign Direct Investment in China has been an essential ingredient in China's trade development. Professor Michael's J. Enright's findings come at a pivotal time as other developing countries, such as Vietnam, India, the Philippines and Indonesia, evaluate their approaches to FDI, while the developed world considers the role that foreign investment can play in infrastructure redevelopment and the creation of next-generation industries," said Merle A. Hinrich. "It is our hope that both government policymakers and business executives will find this book a useful reference point as they chart their course for economic development and trade expansion."

About the Hinrich Foundation 

The Hinrich Foundation, established in 2012 by Mr Merle A. Hinrich, believes sustainable global trade promotes economic prosperity and peace. It aims to encourage individuals, the private sector and governments to drive innovation and competitiveness in trade-related activities by focusing on three program areas, namely trade scholarships & careers, export trade assistance and international trade research. For more details about the Foundation, please visit http://www.hinrichfoundation.com.

About Professor Michael J. Enright

Professor Michael's J. Enright, a leading expert on competitiveness, regional economic development and international business strategy, became the Sun Hung Kai Professor of Business at the University of Hong Kong in 1996 after six years as a professor at Harvard Business School. He is also a director at Enright, Scott & Associates and a founder of The Competitiveness Institute. Professor Enright has consulted for companies, government and multilateral organizations in more than 30 countries on six continents on international business strategy, competitiveness, regional clustering, technology policy and economic development. He has also appeared in 40 countries as a featured speaker, and has authored numerous books and monographs on international competitiveness and China's development.

Hinrich Foundation Press Contacts
Kathryn Dioth, Chief Executive Officer
E-mail kathryn.dioth@hinrichfoundation.com 
Tel      (852) 2555 5020

Stephen Olson, Research Fellow
E-mail stephen.olson@hinrichfoundation.com 
Tel      (852) 9889 5510

Jane Yip, Senior Associate
Email jane.yip@bm.com 
Tel     (852) 2963 6771

Source: The Hinrich Foundation
collection