The Strategy of foreign-invested manufacturing enterprises in China: Export-orientated and market-orientated FDI revisited

Abstract

This paper examines export-orientated and market-orientated foreign direct investment (FDI) in China's manufacturing industry. Based on Fung's () survey estimation of China's market-orientated FDI in 1992 and China's Third National Industrial Census in 1995, we quantify the proportion of market-orientated FDI in China 1992–2002. By combining and verifying various data sources, our estimation shows that market-orientated FDI accounts for the majority of China's total inward FDI in manufacturing industry and has grown faster than export-orientated FDI over the period 1992–2002. Our industry level analysis suggests that Overseas Chinese investors are more export-orientated than Western investors. The study suggests that many inward investors follow a dual market strategy. The coexistence of export-orientated and Chinese domestic market-orientated FDI is a reflection of the flexibility of MNEs to adjust and adapt ownership attributes to the local market context. The study offers insights into the evolutionary development path taken by foreign-invested manufacturing enterprises in China.