Page 103 - Azerbaijan State University of Economics

THE JOURNAL OF ECONOMIC SCIENCES: THEORY AND PRACTICE, V.71, # 1, 2014, pp. 99-119

contributed to the present situation. Ultimately, FDI by Chinese SOEs suffers the stigma of

being economically, socially and politically undesirable. However, closer investigation paints a

more complex and nuanced picture. These aspects of SOE driven FDI will be investigated in

greater detail in the following sections.

We will seek to synthetize the key concepts into a framework by which to help predict

what the future of Chinese FDI in Canada using the following four analytical lenses: Perceptual,

Political, Economic and Social

Perceptual Issues

Negative perception often permeates despite the benefits associated with FDI. Such

benefits include technology transfer and job creation and are all too often ignored. As a result,

Chinese SOEs face resistance in OECD countries based on several misconceptions of their

behaviour that leads to undermine both cultural and commercial relationships. Five of the most

common misconceptions about Chinese SOEs are discussed below.

Misconception 1: Chinese SOEs aim to “lock up” world resources

A common misconception is that Chinese SOEs “lock up” resources through FDI. Chinese

SOEs procure resources through FDI primarily by taking an equity stake or a long-term

procurement contract in an up-and-coming producer to secure a share of production. While the

Chinese appetite for resources, often energy and metals, does put severe pressure on the global

demand for natural resources, recent history shows that Chinese procurement arrangements and

FDI on the whole served to diversify and make more competitive these up-and-coming producers

by providing crucial funding to help increase capacity on the supply side. Theodore Moran

reports that a comprehensive examination of 35 Chinese natural resource investments and

procurement arrangements in Latin America revealed that “twenty three serve to help diversify

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