The document discusses China's strategy of using overseas commercial engagement and acquisitions as a means to project power globally and influence foreign decision-making. It notes that while such economic expansion benefits trade, China's companies and industries remain closely tied to the state's strategic objectives. As Chinese firms increasingly invest and establish operations abroad, their activities must be viewed in the context of advancing China's national interests and industrial plans over the long-term.

1. A Power Projection Mode: China’s Global Commercial Engagement
"China has the resolve, confidence and ability to realize sustained and healthy economic
development and bring more opportunities and benefits to the Asia-Pacific region”
20 November 2015
OE Watch Commentary: As China takes steps to literally create a “grounded” reality in the
South China Sea upon which to base its territorial claims, corporate China is buying companies,
brands, and technologies around the globe. Leaving aside the legitimacy of Chinese claims to the
South China Sea, island building is an overtly aggressive approach to furthering Chinese national
power. In contrast, buying and establishing foreign commercial entities under the rules of the
host nation can be considered potentially beneficial to the foreign partner and global economy.
However, whether it is a Chinese militia fishing fleet staking claims on the sea or Chinese
companies acquiring overseas assets, both foreign initiatives are sanctioned and supported by
Chinese government policy. Each is a mode of power projection intended to further political
objectives. Strategic China watchers need to understand the geostrategic implications of both
facets of China’s increasing global presence, because each is a means by which the Communist
Party of China (CPC) hopes to shape its operating environment and influence foreign decision-
making (friend and foe alike).
China’s corporate overseas expansion, or “going out” strategy, is a means to acquire the
technological, human, and natural resource capital not readily found in China. Concurrently, it is
a means to improve Chinese corporate efficiency through exposure to the competitive pressures
and ideas of the global marketplace that simply being an export platform – the “world’s factory”
– cannot provide. China’s direct foreign presence and ownership more completely builds its
companies and their interests into the supply chains and decision matrixes of foreign
corporations, as well as national governments. If a foreign partner depends on a Chinese
company for investment, jobs, or purchases, it is logical to assume, all else being equal, that the
foreign partner will be less likely to upset its Chinese partner. All governments exercise some
degree of influence over their nation’s business sector, but, more so than any other globally
relevant nation, China’s national industrial model is extensive (e.g., China’s massive state-owned
enterprises/SOE) and robustly exercised (e.g., commercial espionage conducted by quasi-
military groups on behalf of China’s corporate champions). The first excerpted article covers
Chinese President Xi’s speech at November’s Asia-Pacific Economic Cooperation forum in
Manila, Philippines. It announces China’s desire to increase its overseas commercial and
financial presence, while highlighting the benefits available to foreign partners. Clearly, China
wants to be seen as a bearer of good things to the Asia-Pacific region, with the hope that
foreigners will in exchange pay more attention to Chinese interests, interpretations of
international law, and institutional norms.
In the second excerpted article a globally respected Chinese business school provides advice to
China’s corporate leaders on avoiding the pitfalls of overseas expansion. Of particular interest is
the statement that Chinese acquirers usually pay a hefty premium on their foreign acquisitions
compared to developed country buyers. Is this premium a market mechanism for pricing in the
potential future issues of having to deal with the CPC’s industrial policy? Or is it simply
inexperienced Chinese buyers being taken for a ride?
The third excerpted article is a recent announcement regarding the Chinese government’s
continuing massive investment in its domestic semi-conductor industry. As part of a national IT

2. manufacturing plan announced earlier this year to invest over $100 billion over five years, a
Chinese SOE is committing $47 billion to become the world’s third largest chip maker for flash-
memory used in mobile devices. After having its memory chip take-over bid rejected by US-
based Micron, the SOE is reportedly in talks to acquire a similarly placed foreign company.
From a purely commercial perspective, overseas Chinese expansion and acquisitions are
beneficial to the global economy, as they bring capital and competition to the market. However,
Chinese acquirers, especially large ones, are not simple investors. From a strategic perspective,
the fact that they are also agents of their national government’s industrial policy must first be
understood and then addressed in the security calculations of other nations. End OE Watch
Commentary (Zandoli)
Source: “Xi urges closer Asia-Pacific cooperation for common prosperity,” Xinhuanet, 19
November 2015. http://news.xinhuanet.com/english/2015-11/20/c_134834807.htm.
Referring to the proposal on China's 13th Five-Year Plan (2016-2020) adopted at the Fifth
Plenary Session of the 18th
Communist Party of China (CPC) Central Committee, Xi reaffirmed
China's commitment to innovative, coordinated, green, open and shared development. "China
has the resolve, confidence and ability to realize sustained and healthy economic development
and bring more opportunities and benefits to the Asia-Pacific region," Xi said.
Source: “When East Buys West: The M&A Deals of Chinese Companies” CKGSB Knowledge,
27 October 2015.
knowledge.ckgsb.edu.cn /2015/10/27/mergers-and-acquisitions/when-east-buys-west-the-ma-dealsof-
chinese-companies/.
First China, now the world: Chinese companies’appetite for cross-border acquisitions is
growing, and there’s no end in sight. Outbound Chinese direct investment now exceeds $100
billion a year…, and over the next five years these investments are expected to grow significantly:
total foreign assets held by Chinese companies are expected to rise from around $6.4 trillion
today to nearly $20 trillion by 2020.
Source: “China's Tsinghua Unigroup to invest US$47 billion to build chip empire,” Channel
News Asia, 16 November 2015. http://www.channelnewsasia.com/news/business/exclusive-china-s-
tsingh/2265626.html.
China's Tsinghua Unigroup Ltd plans to invest 300 billion yuan (US$47 billion) over the next
five years in a bid to become the world's third-biggest chipmaker, the chairman of the state-
backed technology conglomerate said on Monday. Chairman Zhao Weiguo also told Reuters in
an interview in Beijing that the company controlled by Tsinghua University, which counts
President Xi Jinping among its alumni, was in talks with a US-based company involved in the
chip industry.
Source: www.news.cn