What is strategic-asset-seeking and does it help explain why Chinese Essay - 1

What is strategic-asset-seeking and does it help explain why Chinese business groups internationalise their operations - Essay Example Inward FDI also resulted in massive foreign exchange reserves, which was also a reason for Chinese companies to move overseas (Andersson and Wang, 2011). However, these push factors do not explain the true motives for the Chinese firms to internationalize. Earlier the theories of internationalization focused on the eclectic paradigm developed by Dunning and the Uppsala Model of internationalization. Firms then believed in new theories of trade such as market-seeking or resources-seeking motive (Liu and Buck, 2009) to internationalize. Today â€Å"going out† is the name that China calls its strategy of ODI (The Economist, 2012). The motivation to go out could range from market-seeking strategy to avoidance of country-of-origin effect (Salidjanova, 2011) and is not restricted to strategic-asset seeking motives. In short, China invests in any business where it serves China’s interest, according to Salidjanova (2011). Based on the theories of internationalization, this paper seeks to evaluate the motives for Chinese firms to move overseas. Chinese outward FDI (ODI) gained impetus in 2004 and by 2010 it ranked 5th among all economies in terms of outward FDI flows (UNCTAD, 2011). From 2004 to 2011 it grew from $5.5 billion a year to $65 billion a year and is expected to reach $150 billion by 2015 (The Economist, 2012). This significant jump in ODI is shown in the chart below. Initially the ODI from China was in neighbouring developing nations requiring limited resources (Liu and Buck, 2009). The pull factors that induced ODI from China were natural resource endowments and market potential (Biggeri and Sanfilippo, 2009). The largest ODIs came from Chinese state-owned enterprises (SOEs) such as China Petroleum & Chemical Corporation (SINOPEC) and China National Petroleum Corporation (CNPC) (Andersson and Wang, 2011). An empirical study of