Characteristics and Impacts of the arrival of Chinese and Indian Firms in Europe: first evidence...
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Transcript of Characteristics and Impacts of the arrival of Chinese and Indian Firms in Europe: first evidence...
Characteristics and Impacts of the arrival of Chinese and Indian Firms in Europe: first evidence
Christian MilelliFrançoise Hay
Copenhagen Business School 9-10/10/2008
Purpose of the research
Better understanding of the surge of FDI flows from developing countries
Targeting Chinese and Indian firms at the forefront of the rising wave
Purpose of the research
Tackle economic impacts on recipient countries
Europe as a Case-study
Due to well-known limits of macro data on FDI we inclined to a firm-level analysis
Outline
1. A firm-level analysis on Europe’s case1.1 Data collection
1.2 Methodology1.3 Main empirical findings
2. Impacts on European economies2.1 A systematic framework
2.2 Complementary versus Competitive impacts2.3 Four economic domains (FDI, Trade, Employment, Competition)
3. Discussion andDiscussion and Perspectives
1. A firm-level analysis1.1 Data collection
Founded on an exclusive database plus selected face-to-face interviews conducted across Europe (second half of 2007)
Database coverage: time period (since 1980), space (EU), investments (significant operations, i.e. more than 10 employees), amount (1,200 operations)
Methodology: descriptive, inductive, and comparative
1. A firm-level analysis1.2 Methodology
Methodology of the current research: descriptive, inductive, comparative and exploratory
1.3 Main empirical findingsHistory
Number of establishments
1.3 Main empirical findings Modes of entry
Greenfield Buy-out
China 60.5% 32%
Hong Kong 12% 86%
India 46% 49 %
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1.3 Main empirical findings
Geographic distribution
See following maps- Firms from China- Firms from India
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1.3 Main empirical findingsFunctions
China Hong Kong
IndiaProduction 36% 33% 38%
R-D 23% 4% 2%
Services 62% 57% 55%
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1.3 Main empirical findings Sectoral composition
Firms from Mainland China
Equipment 46%Telecommunication 21.7%
Electrical-Electronic 17.6%Machinery 6.6%
Motor Vehicles 10%Transport 6.6%Chemicals and chemical products 6.6%Household appliances 6 %Textile-Clothing 5.7%Finance 1.5%
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1.3 Main empirical findings Sectoral composition
Firms from India Software, Consultancy 42%Chemicals & chemical products 19.3%
Pharmacy 13%Other chemical products 6.5%
Electrical & Electronic 4.5% Motor vehicles 3.5%Food & Beverages 3.5%Machinery 3%
Textile & Clothing 3%
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2. Impacts
Difficult to assess because: Too early to assess what effects might be at play Europe: not a homogeneous bloc as countries
and groups within countries may be affected differentially (producers, workers, consumers)
Impacts may change over time
Direct and indirect effects overlap as they depend on:
the strategies and motives of the investors (access to markets, sale networks, know how, brands, niches, …)
the comparative advantages of the recipient country
the activities, the mode of entry,...
2.1 A systematic framework
Inspired by Kaplinsky & Messner (2008)
Complementary impacts versus Competitive impacts
Focus on economic aspects:- FDI - Trade - Employment - Competition
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FDI
Nature of impacts
Impacts and causal connections
Complementary A fresh source of FDI for European economies
Competitive Compete with FDI from other countries - particularly Developing ones - in Europe,
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Trade
Nature of impacts
Impacts and causal connections
Complementary
FDI from China and India support the imports of cheap consumer goods and inputs (China), and of services (India)
Competitive Chinese and Indian Imports• potentially displace local producers • increase trade deficit (or reduce it when production activities are created)• increase the influence of developing countries upon international organizations (WTO)
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Employment
Nature of impacts
Impacts and causal connections
Complementary Extra jobs (Huawei, COSCO…) Jobs safeguarded (China BlueStar, Hut. Whampoa, Johnson Electric...)Vacant crenels occupied, some industries revived
Competitive Lay-off resulting from relocation (TCL, Fooktin, YGM, Greencool...)Some European activities are disappearing
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Competition
Nature of impacts
Impacts and causal connections
Complementary European firms spurred to adopt more efficient manufacturing processes, and to innovate
Competitive New competitors for European firms- Backed by their State (Chinese firms), low manufacturing costs, large home market, … - Able to absorb and replicate the ’best practices’ and technologies they acquired from Western companies (at home through partnerships or overseas)
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3. Perspectives
Chinese and Indian perspectives in Europe seem to be contrasting (perceived or effective?)
However, complementary impacts (FDI) should increase and be welcomed (even SWFs!)
The same is true for employment with a mild if not a positive impact on Europe’s job levels
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3. Perspectives
The anticipated results for trade are more mixed (with more competitive impacts), particularly from Chinese FDI. Actually, Chinese investments in Europe can contribute to the deepening of the EU trade deficit with China
Last, in competition domain both impacts are at play, with ‘over-competition’ in some industries based on very different strategies. Also, larger choice and lower prices for European consumers (wealth effect)
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END
Thank you …