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State‐owned Enterprises' Outward Investment and the Structural Reform in China
Author(s) -
Song Ligang,
Yang Jidong,
Zhang Yongsheng
Publication year - 2011
Publication title -
china and world economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.815
H-Index - 28
eISSN - 1749-124X
pISSN - 1671-2234
DOI - 10.1111/j.1749-124x.2011.01249.x
Subject(s) - china , monopoly , market economy , accession , investment (military) , competition (biology) , business , sword , state (computer science) , position (finance) , economic reform , state capitalism , foreign direct investment , state ownership , economic system , international economics , economics , international trade , finance , european union , capitalism , political science , politics , ecology , macroeconomics , algorithm , computer science , law , biology , operating system
Since China's accession to the WTO in 2001, China has been on a steep learning curve in terms of engaging in outward direct investment, and state‐owned enterprises (SOEs) have played a predominant role in this drive. We argue that investment overseas by SOEs is a double‐edged sword as far as its impact on domestic reform is concerned. Investing overseas offers opportunities to deepen structural reform in China, but such investment could also strengthen the monopoly position of some SOEs, which is inconsistent with the objective of domestic reform. Therefore, it is important for China to deepen domestic reform with respect to competition, ownership and regulations, to maximize the benefits from investing overseas. The present paper also discusses how building market‐compatible institutions will result in increased innovation. This provides opportunities for Chinese firms to effectively catch up with the advanced technologies to remain competitive in overseas markets.