Go Out policy

Go Out policy (Chinese: 走出去战略; pinyin: Zǒuchūqù Zhànlüè) or the Going Global Strategy^[1]: 6 is the People's Republic of China's current strategy to encourage its enterprises to invest overseas. The policy was announced as a national strategy by Jiang Zemin in March 2000.

History

China's Two Markets, Two Resources policy predated the Go Out policy and subsequently regarded as related to the Go Out policy.^[2]: 73 Two Markets, Two Resources, emphasizes leveraging domestic supply sources of resources (including through increased investment in prospecting and mining) and international sources of resources (through various strategies, including foreign acquisition, investment, short-term purchasing, and long-term purchase contracts).^{[2]: 73–74} Also related, the One Third, One Third, One Third policy prescribes that in procuring natural resources, one third of China's supply should come from domestic production, one third from direct procurement contracts, and one third from foreign acquisitions.^[2]: 74

Jiang Zemin first began encouraging domestic enterprises to "go global" and enter foreign markets in 1996, a time when the domestic market was showing signs of stagnation.^[3]: 76 In Jiang's view, Going Out into foreign markets was necessary to advance China's development.^[4]: 56 In February 1998 at the Second Plenary Session of the Fifteenth Central Committee, Jiang stated that as part of the policy on responding to the Asian Financial Crisis, leaders should encourage exports and support powerful state-owned enterprises in setting up factories overseas.^[5]: 402 Jiang formally announced it as a national strategy in March 2000.^[4]: 56 The policy was implemented top-down from central government leadership.^[6]: 123 The policy it was incorporated into the report of the 16th National Congress of the Chinese Communist Party.^[3]: 77 During Jiang's tenure, the policy greatly expanded China's investment and influence in global South countries, especially those in Africa and Asia.^[6]: 124

Pursuant to the Go Out policy, by the end of 2001, China was participating in more than 195 overseas resource projects, invested more than US$8.4 billion to establish more than 6,610 overseas enterprises, and signed a total of US$26.8 billion for foreign labor services.^{[5]: 402–403} In the early 2000s, Chinese enterprises were generally unable to compete with enterprises from the more industrially developed countries and frequently accepted projects in which those enterprises were not interested.^[1]: 17

State-owned enterprises have been some of the most high-profile entities investing overseas as part of the Go Out policy.^[7]: 6 Significant SOEs involved in Going Out include China National Petroleum Company.^[5]: 403

China's sovereign funds have supported efforts to Go Out, including by helping Chinese enterprises finance mergers and acquisitions abroad.^[4]: 11 In 2015 for example, China Investment Corporation turned one of its divisions into the wholly-owned subsidiary CIC Capital. This move was intended to support the Belt and Road Initiative including by conducting foreign direct investment and by supporting state-owned enterprises of China engaged in mergers and acquisitions in economic sectors prioritized by the state.^[4]: 114

In 2015, the Ministry of Agriculture issued the Strategic Plan for Agricultural Going Out, providing state subsidies to enterprises that invested in various overseas locations.^[8]: 251

As of at least 2024, and unlike the early days of the Go Out policy, many Chinese enterprises are internationally competitive and able to competitively in the more developed markets.^[1]: 17

Examples

Emerging markets have been an important part of China's going out strategy.^[9]: 225 For example, in Africa Chinese direct investment rose from $1 billion in 2004 to $24.5 billion by 2013.^[3]: 77 Within Africa, Ethiopia is a particularly emphasized place where Chinese companies should "go out" to, with Chinese top leadership describing Ethiopia as a "bridge" between the Belt and Road Initiative and Africa's development, as well as "a pilot country for China-Africa production capacity cooperation."^{[10]: 222–223}

Overseas SEZs

From 1990 to 2018, Chinese enterprises established eleven SEZs in sub-Saharan Africa and the Middle East including: Nigeria (two), Zambia, Djibouti, Kenya, Mauritius, Mauritania, Egypt, Oman, and Algeria.^[11]: 177 Generally, the Chinese government takes a hands-off approach, leaving it to Chinese enterprises to work to establish such zones (although it does provide support in the form of grants, loans, and subsidies, including support via the China Africa Development Fund).^[11]: 177 These zones fall within the Chinese policy to go out and compete globally.^[11]: 182

The first Chinese overseas SEZs facilitated the offshoring of labor-intensive and less competitive industries, for example in textiles.^[11]: 177 As Dawn C. Murphy summarizes, these zones now "aim to transfer China's development successes to other countries, increase business opportunities for China manufacturing companies, avoid trade barriers by setting up zones in countries with preferential trade access to important markets, and create a positive business environment for Chinese small and medium-sized enterprises investing in these regions."^[11]: 177

Agricultural enterprises in Africa

Since the mid-1990s, China has encouraged its agricultural enterprises to seek economic opportunities abroad as part of its go out policy, including to Africa.^[11]: 188 Chinese policy guidance has specifically encouraged such efforts in rubber, oil palm, cotton, vegetable cultivation, animal husbandry, aquaculture, and assembly of agriculture machines.^[11]: 188 The encouragement for agricultural enterprises to go out has also resulted in the creation of Agricultural Technology Demonstration Centers in African countries.^[11]: 184 The function of these centers is to transmit agricultural expertise and technology from China to developing countries in Africa while also creating market opportunities for Chinese companies in the agricultural sector.^[11]: 184 China is motivated to establish these centers out of both an ideological commitment to fostering South-South cooperation and sharing its experience with less developed countries and by a pragmatic desire to increase its long-term food security.^{[11]: 182–188}

China first announced its Agricultural Technology Demonstrations Centers at the 2006 meeting of the Forum on China-Africa Cooperation. It launched 19 of these centers between 2006 and 2018, all in sub-Saharan Africa.^[11]: 184 As of 2023, ATDCs have been established in 24 African countries.^[12]: 173

Southeast Asia

Southeast Asia has been a major recipient of Chinese investment prompted by the Go Out policy.^[7]: 80 Chinese foreign direct investment in southeast Asia is primarily in sectors like mining, energy, industrial parks, and infrastructure.^[7]: 80 As of 2024, Chinese investment in agriculture in southeast Asia is comparatively small but growing.^[7]: 80

Energy

Because the more accessible oil resources had already been claimed, when China National Petroleum Company and other enterprises went out, they tended to enter less politically stable countries with greater political and security risks.^[3]: 77

See also

• Economy of China
• Foreign policy of the People's Republic of China

References

1. Chen, Muyang (2024). The Latecomer's Rise: Policy Banks and the Globalization of China's Development Finance. Ithaca and London: Cornell University Press. ISBN 9781501775857.
2. Massot, Pascale (2024). China's Vulnerability Paradox: How the World's Largest Consumer Transformed Global Commodity Markets. New York, NY, United States of America: Oxford University Press. ISBN 978-0-19-777140-2.
3. Meng, Wenting (2024). Developmental Peace: Theorizing China's Approach to International Peacebuilding. Ibidem. Columbia University Press. ISBN 9783838219073.
4. Liu, Zongyuan Zoe (2023). Sovereign Funds: How the Communist Party of China Finances its Global Ambitions. The Belknap Press of Harvard University Press. doi:10.2307/jj.2915805. ISBN 9780674271913. JSTOR jj.2915805. S2CID 259402050.
5. Wu, Guoyou; Ding, Xuemei (2020). Zheng, Qian (ed.). An Ideological History of the Communist Party of China. Translated by Sun, Li; Bryant, Shelly. Montreal, Quebec: Royal Collins Publishing Group. ISBN 978-1-4878-0392-6.
6. Garlick, Jeremy (2024). Advantage China: Agent of Change in an Era of Global Disruption. Bloomsbury Academic. ISBN 978-1-350-25231-8.
7. Han, Enze (2024). The Ripple Effect: China's Complex Presence in Southeast Asia. New York, NY: Oxford University Press. doi:10.1093/oso/9780197696583.001.0001. ISBN 978-0-19-769659-0.
8. Harrell, Stevan (2023). An Ecological History of Modern China. Seattle: University of Washington Press. ISBN 9780295751719. JSTOR jj.8362580.
9. Eisenman, Joshua; Heginbotham, Eric (2023). "China's Relations with the Global South". In Kironska, Kristina; Turscanyi, Richard Q. (eds.). Contemporary China: a New Superpower?. Routledge. doi:10.4324/9781003350064-25. ISBN 978-1-03-239508-1.
10. Yan, Hairong; Sautman, Barry (2024). "China, Ethiopia and the Significance of the Belt and Road Initiative". The China Quarterly. 257 (257): 222–247. doi:10.1017/S0305741023000966.
11. Murphy, Dawn C. (2022). China's Rise in the Global South: the Middle East, Africa, and Beijing's Alternative World Order. Stanford, California: Stanford University Press. doi:10.11126/stanford/9781503630093.001.0001. ISBN 978-1-5036-3060-4. JSTOR jj.8305946. OCLC 1249712936.
12. Shinn, David H.; Eisenman, Joshua (2023). China's Relations with Africa: a New Era of Strategic Engagement. New York: Columbia University Press. doi:10.7312/shin21000. ISBN 978-0-231-21001-0. JSTOR 10.7312/shin21000.