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With the continuous expansion and deepening of China’s opening to the outside world, China has become one of the largest countries and regions in the world that receive foreign direct investment (FDI). FDI has taken an increasingly important position in China's economy and has played a huge role in the sustained growth of China's economy. Since entering the 1990s, the focus of FDI has gradually shifted from light industry to heavy chemical industry, and the direct investment of international large multinational companies has occupied a major share. In several fields of equipment manufacturing, multinational companies have increasingly invested in joint ventures or wholly-owned enterprises, and they have taken an increasingly important position in the entire industry.
While recognizing the positive effects of FDI on China's economic development, technological progress and industrial upgrading, it should also attach great importance to the negative effects of direct investment by multinational corporations.
Foreign-owned Enterprises Expropriate Market Share and Growth Space
The main purpose of large foreign multinational companies investing in China is to occupy a vast market in China and use the advantages of abundant labor resources in China. Due to the strength of multinational companies and advanced technology, they also take advantage of the low cost of labor in China, and foreign-funded enterprises also enjoy preferential policies granted by a number of countries. Therefore, foreign-funded enterprises are more competitive. On the other hand, on the whole, China’s domestic-funded enterprises are small in scale, weak in strength, backward in technology and products, and their competitiveness in some areas is very weak. Foreign-funded enterprises have seized and occupied a considerable domestic market share in China's market competition, and have diverted the growth potential of domestic-funded enterprises.
In recent years, the tendency of foreign-funded enterprises to seize the high-tech industries and high-profit sectors with large development prospects in China is very clear. In many industrial fields, the direct investment of multinational corporations in China is very large, and the scale and output of their investment companies ranks in the forefront of the industry. According to statistics, the top ten largest companies in the microelectronics, communications equipment, and sedan industries and foreign companies all occupy more than two-thirds of the seats, and occupy more than 90% of the mobile phone market share and more than 80%. Sedan market share. In some industrial fields, such as electronics and communications equipment, direct investment and mergers and acquisitions by multinational corporations have made foreign companies occupy a dominant position and endanger China's industrial security. In addition to well-known industries such as automobiles, electronics, and communications equipment, the number, size, and market share of foreign-funded companies in the fields of major technical equipment, such as power transmission and transformation equipment and hydroelectric power equipment manufacturing, have also been expanding in recent years.
In recent years, there have been some noticeable new trends in the investment and M&A activities of large multinational corporations in China. First, multinational corporations’ investment in China seeks to obtain corporate control. On the one hand, FDI increasingly adopts sole proprietorship, and has become the main form of investment by multinational corporations, and the number of companies has greatly increased. On the other hand, foreign investors actively increase their capital and expand shares in various ways, and acquire Chinese shares in joint ventures to expand foreign shares to gain control.
Secondly, multinational corporations have previously mainly invested in new companies, and now they are mainly adopting mergers and acquisitions of domestic companies. And it began to shift from state-owned enterprises with scattered and random acquisitions to state-owned large and medium-sized enterprises with good purpose and planned merger and acquisition efficiency, and even large-scale backbone enterprises in the M&A industry. This kind of purposeful M&A activity is different from “greenfield investment†and does not add new host country’s production capacity, but it achieves the multiple purposes of eliminating domestic competitors and using the original enterprise base to occupy the domestic market.
FDI's spillover effect is questionable
Many experts and scholars believe that the reason why FDI promotes economic development and industrial progress is because FDI has a strong technology spillover effect. Its main channels for technological spillover include the following three aspects:
The first is the imitation effect. The entry of multinational corporations has produced a certain demonstration effect on local companies in the host country, and at the same time it has formed a certain competitive pressure on local enterprises, enabling local companies to imitate the advanced technologies of multinational corporations and improve the technology of the corporation.
The second is the associated effect. In the process of procurement, production and sales, multinational corporations inevitably need to contact local suppliers and users, such as product technical introduction, sales, technical services, etc., as well as technical requirements and guidance for suppliers. Training and so on. In these processes, the products, technologies, and processes of multinational companies will inevitably lead to leakage, allowing local companies to learn and master some knowledge and technology.
The third is the effect of human capital flows. The outward flow of people employed by multinational companies may bring local companies with advanced technology and management experience from multinational companies.
From the actual situation of the flow of human capital, due to the obvious gap in talent management and treatment between Chinese and foreign companies, Chinese companies, especially state-owned enterprises, have invested large amounts of resources and provided plenty of opportunity to train and train senior personnel to flow to foreign-funded enterprises. The serious loss of corporate talent, even when serious, also brought about the loss of technology. At the same time, a large number of excellent graduates from domestic colleges and universities, especially famous universities, have rushed to foreign-funded enterprises, causing high-level talents in domestic enterprises to receive no effective supplements. The absorption of domestic high-level talents by foreign-funded enterprises has caused domestic enterprises, especially state-owned enterprises, to have a shortage of human resources. Therefore, the flow of talents brought about by the direct investment of multinational corporations is largely a "reverse" flow, resulting in a negative effect of the flow of human capital.
From this perspective, what foreign-funded enterprises generate for domestic companies in China is not a “technical spillover†effect but a “technology absorption†effect. Mimicry effects and related effects exist to a certain extent, but because transnational corporations generally invest mature technology in local host countries, they retain advanced technology or advanced technical links abroad, and foreign companies strictly control the technology. As well as confidentiality measures, the use of imitation effects and associated effects is limited.
The purpose of "changing technology for the market" has not been achieved
"Market-for-technology" is a relatively common practice in the introduction of foreign technology in China's industrial sector. It refers to the strategy of obtaining foreign advanced technology through the transfer of domestic market share to foreign manufacturers. "Market-for-technology" can be divided into two ways: First, to attract foreign advanced technology through attracting FDI; second, to combine imported foreign products and technologies, that is, "combination of technology and trade", and to achieve the purpose of introducing advanced technology through trade. In many industries, our country adopts the goal of achieving "market-for-technology" through the introduction of foreign capital. However, there are many problems with this approach.
After many years of development, many manufacturing companies in China have already possessed certain technological development capabilities and established their own brands. After joint ventures or mergers with foreign multinationals due to various reasons, the joint ventures introduce the technology of multinational companies to produce and operate. Under this circumstance, the impetus for China’s independent development and innovation is insufficient, and it has given up the certain technology development capabilities and brands that China already possesses, and instead adopted and relied on the technology provided by multinational companies. After joint ventures, many Sino-foreign joint ventures dismantled the existing technology development institutions of the original company, causing Chinese technology dependence on foreign companies and the ability of independent innovation to deteriorate.
Since the technology invested by multinational corporations is generally not its most advanced technology, joint ventures can only produce in accordance with the technology transferred by foreign investors, while importing key components from foreign countries at high prices. A company that originally integrated R&D and manufacturing became a processing and assembly plant, losing the opportunity for technology integration. For foreign multinationals, they not only occupied China's market through direct investment, but also obtained high profits through technology transfer royalties and key components, and also achieved technical control and monopoly.
In fact, apart from the market and the use of local advantageous resources, the purpose of multinational corporations investing in host countries is one of the important factors that is to control advanced technology within their own company in order to obtain "internal advantages."
Some Chinese companies have not achieved the goal of “market-for-technology†through the introduction of foreign investment, and have even led to a decline in the ability of independent industrial development. China's situation in the automotive industry is like this. It has sold a huge domestic market. Chinese companies have not really acquired the proprietary technology ownership of multinational car manufacturers. The dependence on foreign manufacturers has increased, and the capacity for independent development has been weakened.
Over time, China's research and development resources and capabilities that have accumulated over many years in many industries and Chinese brands will gradually be lost.
The development of equipment manufacturing industry needs to "autonomy"
With the continuous deepening of economic globalization and the continuous expansion of China’s opening up, there are different views on whether it is necessary to develop the national industry in our country. The author believes that the country’s competitiveness depends on the competitiveness of the national industry. Therefore, the emphasis on the development of the national industry still has practical significance. For industries with different degrees of importance, the degree of control in the country may be different, and the degree of concept of the national industry may be different.
As China is a big developing country, equipment manufacturing has important significance for improving China's overall strength and international competitiveness, because several equipment manufacturing fields involve national security and economic lifelines. In order to ensure the long-term development of China’s economy and become a political and economic power in the world, and prevent the control of others, accelerating the development of China’s equipment manufacturing industry is not only to promote the development of the equipment industry with various ownership structures in China, but also to promote the autonomy of China’s national equipment manufacturing industry in particular. Development will improve the autonomy of China's equipment manufacturing industry.
Therefore, the guiding ideology for China's equipment manufacturing industry to attract foreign investment should be that, while promoting the development of domestic industries in our country, it must be guided by the development of autonomy that emphasizes the development of China's domestic-funded enterprises and enhances competitiveness. The entry of FDI should be limited to the extent that it does not impair the growth of Chinese enterprises. The development of independent development is centered on the improvement of equipment autonomy and the independent development of core competencies, and aims to foster and promote the growth and expansion of domestically funded enterprises in China. The author believes that the main contents of autonomy of equipment manufacturing industry include three aspects: maintaining ownership or management of capital in China; or controlling or controlling the core technologies in China; adopting Chinese product brands.
Four Suggestions for Adjusting Foreign Investment Policy
In order to promote the autonomous development of China's equipment manufacturing industry, China's foreign investment policy should be adjusted in the following four aspects.
First, for different industries, the policy of introducing foreign capital should be different
There may be little or no restriction on foreign investment in the general competitive industry, and industries with very weak foundation or no foundation in China may be developed by introducing foreign capital. For industries in China that have had considerable technology and production bases after years of development and have a huge market demand space, especially some strategic equipment industries that involve national economic security and reflect the strength of a country’s industry and science and technology, they should carry out the entry of foreign capital. Control or limit. For these industries, we must implement the principle of independent development, maintain China's autonomous control position in this industry, and provide sufficient market space for domestic companies to grow and expand. Targeting multinational corporations to acquire large-scale key enterprises in China in an attempt to obtain control rights and monopolize the market will require special attention and restrictions.
Second, the main purpose of utilizing foreign capital should be to shift from the shortage of funds to the introduction of advanced technologies.
On the one hand, policies encourage and motivate or force multinational companies to bring their advanced technologies into the country. The effect of technology spillover is closely linked with the host country’s own technological level and market competition status. The higher the host country’s own technological level, the smaller the technological gap with foreign multinationals, and the more conducive to technological spillovers. To this end, our government and enterprises should increase investment in technological development, improve China's technological level and the competitiveness of enterprises, in the same industry to introduce a number of multinational companies and allow them to compete fiercely with each other. On the other hand, it is necessary to limit the separation of the production process and technology development of products and the development and production of key core components. In the process of attracting foreign investment in the future, we must try our best to force foreign companies to fully integrate product technology development and production of key components into the domestic market, and it is best to focus on one enterprise or one enterprise group, so that the backbone enterprises of our country can be integrated and controlled as a whole. , Master integration technology and key core technologies, not to be divided and ruled by foreign investors.
Third, preferential policies for foreign-funded enterprises should be gradually reduced and cancelled
In the past, in order to attract FDI vigorously, China has formulated and implemented many preferential policies for foreign-funded enterprises, making the tax rate of foreign-funded enterprises lower than that of domestic-funded enterprises. The preferential taxation policies for foreign-funded enterprises include the reduction or exemption of corporate income tax, and the reduction of tariffs on imported equipment and key parts and components. Foreign-funded enterprises have actually obtained “super national treatment†within China’s territory. At present, as China has achieved considerable results in attracting foreign investment, the demand for foreign capital has gradually decreased. At the same time, the improvement of the investment environment has increased the attraction of foreign capital. The most important thing is that China has a vast and highly promising market demand. Under this circumstance, preferential policies for foreign investment should be gradually reduced and eliminated. Only in this way can our Chinese enterprises participate effectively in the market.
Fourth, adjust the “market-for-technology†approach to the “market-for-technology†approach of attracting foreign investment in industries such as autos. The introduction of technology-incorporated technology has many advantages: Domestic companies can maintain their independence. Research and development efforts and inputs and gradually improve the ability of independent innovation; due to the lack of capital integration and solidification of cooperation with foreign parties, domestic companies are not easy to form a dependence on a foreign technology, and have the initiative and flexibility of foreign advanced technology choices. , Can take the best of both sides, and eclectic; companies can independently cultivate and shape the Chinese brand, easy to maintain independence and autonomy in the market competition, to avoid foreign control of product sales, access to more market opportunities. In recent years, China's power generation equipment manufacturing industry has introduced the Three Gorges large-scale hydropower generating units, heavy-duty gas turbines, supercritical units and other domestic urgently needed technologies and products with world-class technology, which has greatly improved the localization of China's power generation equipment manufacturing industry. And autonomy.
In the work of introducing foreign technologies, it is necessary to actively encourage the use of "combination of tech and trade" to promote the technological progress and autonomy of China's equipment manufacturing industry. Combining the experience and lessons learned from the introduction of equipment manufacturing technology, China's equipment manufacturing companies must increase their efforts to digest and absorb imported technology, and realize the re-innovation of imported technology to grasp the core technologies and avoid falling into the introduction-backward-re-introduction-and then fall behind. Traps.
In short, while recognizing that FDI plays an important role in China's economic development, it must also take seriously the negative effects of large-scale direct investment by large multinational companies in China's equipment manufacturing industry, and must actively take corresponding countermeasures to promote The independent development of China's equipment manufacturing industry.
The Foreign Capital Policy for Equipment Manufacturing Industry to be Adjusted
Equipment manufacturing industry refers to the manufacturing industry that provides production tools for all sectors of the national economy. It is the core and foundation of manufacturing. It is a concentrated embodiment of a country’s industrial and scientific and technological strengths. It involves the lifeline of the national economy and national security, and determines the synthesis of a country. National strength and international competitiveness. After more than 50 years of development, China's equipment manufacturing industry has established a relatively complete industrial system, has a considerable scale and strength, and has become a pillar industry of China's national economy. Vigorously revitalizing the equipment manufacturing industry is an important task put forward by the Party’s 16th National Congress and the 11th Five-Year Plan of the country. It is an important strategic measure for implementing the scientific development concept, taking a new road to industrialization, and realizing the sustainable development of China’s economy. The comprehensive national strength and international competitiveness are of great significance.