The School of Management at Fudan University hosted a theme forum of “Rise of Emerging Market Multinational Enterprises” and released a ranking list of China-based multinational firms in AIA Hall on October 22 afternoon in 2008.

As the international coordinator of this survey project, Dr. Karl P. Sauvant, Executive Director of the Vale Columbia Center on Sustainable International Investment (VCC) at Columbia University, who is also former director of investment department of United Nations Conference on Trade and Development (UNCTAD), introduced the latest development of multinational enterprises (MNEs) on the global stage.

Professor XUE Qiuzhi, Associate Dean of Fudan’s School of Management, who is directing International Business Management Research Center at Fudan University, released the official ranking of Chinese MNEs.

Business people and scholars on the event continued to deliver keynote speeches under three focuses separately, that is, “foreign investments by Chinese enterprises,” “comparison between BRIC MNEs,” and “emerging market countries: new growth polar in global economy.”

Emerging market MNEs are expanding rapidly worldwide as a new kind of investors. Eyeing that, VCC has initiated this international cooperation program in the name of Five Diamonds Conference Cycle, a club which is composed of top business schools from four BRIC nations (Brazil, Russia, India, China).

Supported by the South-South Cooperation Project of the United Nations, the program is dedicated to propelling foreign investments by emerging market countries and the development of their mutual investments, through means of academic research and comparative study to discover and disseminate up-to-date theories and achievements in the investment filed.

The School of Management at Fudan University has represented China as a global partnership to conduct the program.

Professor XUE Qiuzhi, associate Dean of Fudan’s School of Management, who is directing International Business Management Research Center at Fudan University, has acted the role of program coordinator for China region. In line with the overall arrangements for the program, Professor XUE and his research team have conducted a widespread survey on Chinese MNEs, before concluding the ranking list of Chinese MNEs which has come in accordance with international practical rules.

Additionally, the ranking of Chinese MNEs is to be part of a bigger picture of “Top-200 emerging market MNEs in the world,” which will see the joining of rankings for Brazil, Russia, Slovenia, Israel, India and other regions (see www.vcc.columbia.edu).

A number of 18 large Chinese MNEs are found to have their final slots in the Chinese ranking. They fall into four broad industry categories – diversified, natural resources, labor intensive, and manufacturing, accounting for 36%, 23%, 31% and 10%, respectively, out of their foreign assets in total.

Survey shows that, As of December 31 of 2006, those 18 large Chinese MNEs had at least US$79bn in overseas assets, employed over 121,358 persons abroad, and had US$79bn in sales by their foreign affiliates.

State-controlled MNEs, such as China National Petroleum Corp. and Shanghai Automotive Industry Corporation (Group), are being more proactive international players, as are majority-owned private firms Lenovo and TCL.

Chinese firms have been accelerating their international expansion. Foreign direct investment outflows from China increased from US$4 billion in 1992 to US$16 billion in 2006, making China the fourth largest outward investor in emerging markets in 2006 in terms of outflows (behind Hong Kong (China), Brazil, and Russia).

The survey report indicated 15 biggest cross-border M&As by China in year 2007, as well as 10 biggest cross-border “Greenfield” investments between 2006 and March of 2008. And that acquisition strategy was still going on in 2007.

Besides M&As, recent years also have witnessed an increase in cross-border greenfield investments. US$11.2 billion in greenfield investments were made in 2007 as compared to US$5.8 billion in 2006. That clearly points to a fact that Chinese multinationals have been actively engaging in cross-border M&As over the past five years.

In 2006, about 90% of FDI outflows took the form of international acquisitions. This phenomenon reveals that Chinese MNEs aim to acquire critical assets abroad in order to overcome their latecomer disadvantage.

LU Xiongwen, dean of Fudan’s School of Management, suggests that: “Chinese firms have made great progress in their internationalization in recent years. What is particularly important to note, however, is that now the driving force for internationalization comes from the enterprises themselves rather than the government – like in past two decades.”

Professor LU has been actively pushing forward this international cooperation program. He continues to note that: “Still, most Chinese MNEs are not yet as diversified and mature in their internationalization strategies as are their BRIC counterparts. They are just in the starting phase of cross-border management.”

The weighted average Transnationality Index (TNI) for Chinese MNEs is around 15%, which is lower than the TNI for other BRIC MNEs. This reflects Chinese MNEs are still in the starting phase of multinational development.

Meanwhile, Chinese MNEs lag behind their foreign counterparts in terms of fortifying the overseas assets. Only two of the 18 have more than US$10 billion foreign assets, and only three employ more than 10,000 people abroad. And as reported in World Investment Report 2008, there is not a single Chinese MNE which is among the world’s top-100 non-financial MNEs.

Karl P. Sauvant, Executive Director of the Vale Columbia Center on Sustainable International Investment, adds that: “Chinese MNEs started acquiring foreign assets later than their BRIC counterparts, but they are rapidly making up for lost time. At their current rate, it may not be long before China is the preeminent outward investor among all emerging markets.”

It is just one of numerous occasions in so many years that Fudan’s School of Management has acted up its role as an internationalized player on global stage of business education, and been pouring all out to make the most out of any kind of international cooperation programs.

By representing China and joining hands with other top business schools in the program, the school sees it as a wonderful opportunity to practice what is beheld as its mission: Rooted in a Chinese business environment, we are committed to advancing both academic and applied research and sharing innovative ideas and thoughts. We also strive to develop professional managers, elite scholars and social leaders with global perspectives as well as local insights, and who contribute to economic growth and social development.

School of Management, Fudan University