Cross-border M&A and competitive advantage of Chinese EMNEs

Abstract

Introduction In 2000, shortly before acceding to the World Trade Organization (WTO), the Chinese government came to the view that local companies would need to be globally competitive if they were to match growing rivalry from established multinationals in the home market as well as contributing to China’s broader integration into the world economy. It announced a zou chuqu policy (which loosely translates as ‘go global’) that encouraged local companies to make acquisitions abroad. Numerous state-owned enterprises (SOEs) as well as private corporations took up the opportunity, investing in companies large and small on five continents. According to statistics from Thomson-Reuters, from $1.6 billion in 2000, the value of Chinese mergers and acquisitions (MA Forsgren, 2002) in the narrowest sense of the term. There was also a boom in acquisitions of stakes in financial services companies abroad in 2007 as Chinese financial institutions, with large cash reserves, sought to expand their operations abroad. The timing, with hindsight, was catastrophic – although Chinese financial institutions were hardly alone among their global peers in having their fingers burnt in this arena.