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