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China+India- OFDI

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Katleen Schneider

on 7 June 2010

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Transcript of China+India- OFDI

China What is FDI again? What is OFDI? Outward foreign direct investment China OFDI development chinese M&A steep rise however low base OFDI emerging countries 18th and 4th
place China's OFDI to... world OFDI ratio to GDP Destinations of OFDI China's OFDI into Africa India OFDI Comparison of China and India based in Jamshedpur, Jharkhand, India part of the Tata Group on companies Acquisition of Corus January 31, 2007
100% stake purchase
608 pence per share USD 12.04 Billion Biggest oversea acquisiton by an Indian company Tata Steel as the world's 5th-largest steel group Reasons for acquisitions access to Corus' strong distribution network in Europe expand product range access to new technology Tata Steel also acquired 2 major Asian steel companies Singapore Quizzes What will be the future growth rate for China'S OFDI? why did Indian corporations started investing particullary after 1990? Lately the financial press is speculating
that Lenovo will aquire another enterprise.
Which one?
Conclusion China and India = important sources of OFDI secure access to natural resources
technologies
brand names
distribution networks
crisis as opportunity rise of OFDI in developed countries aCquire strategic assets "Creating new leading PC Business with Global Market Reach" > Strategic asset seeking Thailand India's FDI inflows and outflows, 2001 -2008 (of US$ billions) source: Macquaire Research (October 1, 2008) based on the RBI data First Wave pre-1990 period Second Wave post-liberalization Indian FDI in developed region, 1961-2007 (US$ million) Geographical Destination Destinations Share of India's overseas M&As, 1995-2006 (Average) Source: Accenture (2006) based on data from Thomson Financial Sectoral Destination average annual CHINESE OFDI growth rate 2000-06: 116%
average annual WORLD OFDI growth rate 2000-06: 6% 95% of OFDI flow into developing countries sevenfold increase over 2003-06 Lenovo:
27% Chinese market share
competitiv advantage: low cost production
- no global reach
IBM PC:
distribution network: 160 countries across the globe
leading innovator
strong brand image
service capabilities
- limited reach in China Key risks Integration risk
Political risk Brand risk Cave-out risk Lack of financial transparency "Lenovo buys IBM PC for 1.75 bn US$" 3rd largest company in the PC market 8% world market share Press comments Why do Chinese and indian companies rather
use M&A than greenfield investments? Sectoral Share of India’s overseas M&As, 1995-2006 (Average) Source: Accenture (2006) based on data from Thomson Financial. Selected outbound M&A transactions of over US$1 billion (as of mid 2008) Source: Rajpal and Parekh (2008) based on data from Capital IQ. Motives behind Indian OFDI become key global players liberalization of policies concerning OFDI strategic asset seeking resource seeking
technology and R&D seeking
Brand name and expanding product mixes
market seeking Malvinder Singh (left), ex-CEO of Ranbaxy, and Takashi Shoda, president and CEO of Daiichi Sankyo. Sources Allerts on Emergin Policy Challenges, Asia Pacific Research and Training Network on Trade: Issue No.5, January 2010

Gopalan, S. & Rajan, R. (2010) India’s FDI flows: Trying to make sense of the the numbers, in: Alerts on Emerging Policy Challenges, No.5.
http://www.unescap.org/tid/artnet/pub/alert5.pdf [last accessed 24/04/2010].

Ministry of Finance - Government of India
http://finmin.nic/the_ministry/dept_eco_affairs/dea.html
[last accessed 20/04/2010]

Rajan, R. (2009) Outward Foreign Direct Investment from India: Trends, Determinants and Implications, in ISAS Working Paper, No. 66.
http://se1.isn.ch/serviceengine/Files/ISN/102237/...82E2.../66.pdf [last accessed 26/04/2010].

Rakesh, J. (2006) Outward Foreign Direct Investment From India.
http://www.emergingmarketsforum.org/papers/pdf/2006_EMF_FDI_Out_India_Draft.pdf [last accessed 23/04/2010].

Rameshan, P. (2008) WTO. India and Emerging Areas of Trade - Challenges and Strategies, Excel Book: New Dehli.

Prdhan, J.P. (2005) Outward Foreign Direct Investment from India: Recent Trends and Patterns, in Munich Personal RePEc Archive, No. 12358.
http://mpra.ub.uni-muenchen.de/12358/ [last accessed 23/04/2010].

World Investment Report 2009
http://www.unctad.org/en/docs/wir2009_en.pdf [last accessed 26/04/2010].

Websites:

http://www.tatasteel.com/ [last accessed 27/04/2010].
http://www.corusgroup.com/en/ [last accessed 27/04/2010].
http://www.unctad.org/ [last accessed 27/04/2010]
http://www.infoanda.com/ [last accessed 27/04/2010].

Do you know another Chinese or Indian OFDI example? UK: 75 projects during 2007-2008 Developing countires Devloped countries Greenfield M&A taken from: http://english.sina.com/business/p/1/2004/1208/13028.html, last accessed: 26.04.2010 OECD Investment Policy Reviews: China 2008. Chapter 3: China's Outward Foreign Investment. Available on: www.oecd.org/dataoecd/28/10/40283257.pdf. Last accessed: 26.04.2010

OECD Investment News, Issue 6, March 2008. Available on: www.oecd.org/dataoecd/28/10/40283257.pdf. Last accessed: 23.04.2010

Cheng, L, Ma Z.: China's Outward FDI- Past and Future. July 2007. Available on: www.nber.org/books_in_progress/china07/cwt07/cheng.pdf. Last accessed: 20.04.2010


Ackerly, J. Larsson, M.: The Emergance of a Global PC Giant: Lenovo's Aquisition of IBM's PC Division. Harvard Business School. Cambridge 2005. Available on: http://people.hbs.edu/mdesai/IFM05/AckerlyLars
son.pdf. Last accessed: 28.04.2010

United Nations Conference on Trade and Developement: World Investmet Report 2009. Available on: http://www.unctad.org/en/docs/wir2009_en.pdf. Last accessed: 22.04.2010

Websites:
http://www.ftd.de/premium/audio/leitartikel/:leitartikel-allerweltskram-pc/1102146521037.html
http://www-03.ibm.com/press/us/en/pressrelease/7450.wss
http://news.bbc.co.uk/2/hi/business/4077579.stm
http://www.aasc.ucla.edu/uschina/trade_investment.shtml
http://www.nytimes.com/2004/12/08/technology/08computer.html?_r=1

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