The Effectiveness of the State in Chinese Outward Foreign Direct Investment: The “Go Global” Policy and State-Owned Enterprises

We question whether the Chinese state has played an effective role in promoting outward foreign direct investment via its “Go Global” policies. Using the literature in International Management as our framing, we observe three inter-related stylized realities. First, it is state-owned enterprises (SOEs) – not private enterprises – that tend to principally benefit from the favorable “Go Global” policies. Second, SOEs tend to pay much higher acquisition premiums in outward FDI as compared to non-SOEs. Third, SOEs tend to be less effective as compared to non-SOEs in gaining synergies and enhancing competitiveness as a result of these cross-border experiences. These results yield clear policy implications for the Chinese government: first, more effective public policy would involve enhanced targeting of private enterprises as the recipients of policies promoting outward FDI; second, the Chinese government should continue along the path toward privatization of SOEs. The continued bolstering of economic and social development in China is contingent upon efforts to reduce the state’s active role in outward FDI.