Chinese Foreign Direct Investment and Argentina: Separating Fact from Fantasy

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Chinese Foreign Direct Investment and Argentina: Separating Fact from Fantasy

Chinese Foreign Direct Investment and Argentina: Separating Fact from Fantasy

Introduction

  • Some believe Chinese companies tend to invest more in countries with similar political ideology
  • Argentina ideal bc of large economy and population compared to other countries in the region
  • Kirchnerism in Argentina: defaulted on international debt, lost access to IMF, needed China as means to get access to capital
  • Might have negatively impacted COFDI
  • Chinese investment in Argentina can be explained by OLI rather than ideology (Location mainly rich soil and special tax regimes)
  • Local political interactions can have more negative impacts that bilateral international relations

Economic Relations

  • Economic relations have “center-periphery” characteristics: Argentina supplying primary goods while China supplies higher-valued goods
  • Restrictions on textiles and shoes from Argentina led to China restricting soy oil imports
  • US FDI increased even though government was anti US

Case 1 HBN

  • Internationalization benefits (land, plant, port)
  • Circumvented laws through JV
  • Failed due to political and public resistance

Case 2 SCC

  • SCC saw locational advantages such as natural gas and tax incentives

Case 3 ICBC

  • Bought Standard Banks’ operations and renamed it into ICBC Argentina
  • Access to LA
  • Low asset prices
  • Expectation of more investment

Reading 2:

Chinese outward investments to emerging markets: evidence from Latin America

Introduction

  • Most ownership-advantages of Chinese companies are home-country-specific and network-based
  • Linkage-Leverage-Learning as extension of OLI (push and pull process, about strengthening resources and competitive position)
  • Initial investment was pull from local JV partner
  • Rapid internationalization through JV and related local network
  • Support from Chinese government in LA not as relevant as it had been in developed economies
  • Seems to be most suitable to COFDI in LA
  • Chinese companies have gained ownership advantages that allow them to compete in emerging markets