Foreign Direct Investment from China and Latin America: Can Culture Be Deterring This Kind of Investment?

Foreign Direct Investment from China and Latin America: Can Culture Be Deterring This Kind of Investment?

Jose Godinez (Merrimack College, USA) and Theodore Terpstra (University of Connecticut, USA)
DOI: 10.4018/978-1-4666-8820-9.ch004
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Historically, Chinese corporations have been relatively unknown in Latin America. Total foreign direct investment (FDI) in Latin America was 18.1% of the world total in 2012 (UNCTAD, 2013). However, Chinese FDI in Latin America has averaged about US$10 billion per year since 2010, only a small part of Latin America's total FDI inflows (ECLAC, 2013). Yet the presence and economic leverage of Chinese corporations has become very substantial in several industries in the region, particularly the oil and mining industries. Trade between China and Latin America has also grown dramatically since 1999 (Luo, et al., 2010). Despite the growing economic connectivity between Latin America and China, the motivation, strategy and procedures behind China's FDI in the region have not yet been fully understood.
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3. The Expansion Of Chinese Ofdi

The People’s Republic of China began its “open door” policies in the late 1970s and early 1980s in order to get the country more involved with the global economy (Buckley, et al., 2007). At first, only state-owned corporations were given permission to invest in other countries (Buckley, et al., 2007). Initially such investment was very strictly regulated and had a ceiling set at US$10 million (Luo, 2007). In the late 1980s to early 1990s the Chinese government allowed more state-owned corporations to invest abroad, and in a six year period from 1986-1991, US$1.2 billion of investment was approved (Buckley, et al., 2007). The Chinese government continued relaxing restrictions on outward investment by launching the “go global” initiative in 2000 (Luo, 2007). Following the loosening of restrictions in OFDI, China joined the WTO in 2001. However, private Chinese firms were not allowed to invest abroad until 2003 (Buckley, et. al., 2007).

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