Cross border investment by state-owned enterprises
The paper analyses data on state-owned enterprises as cross-border investors and takes
a first step towards analysing their investment characteristics since 2000. It shows
that the number of cross-border investments by state-owned enterprises was overall
small, with most originating from the People’s Republic of China (hereafter “China”),
and suggests that the investment preferences of state-owned enterprises may fuel excess
capacity in the steel sector. This is because state-owned enterprises display a preference
for building new capacity over acquiring existing capacity when investing abroad,
and a preference for investment destinations with volatile demand growth. Data also
suggest that state-owned enterprises might be more likely to undertake domestic capacity
closures after a cross-border investment, which is likely influenced by recent policies
introduced to curb excess capacity in China. Conversely, the data offer insufficient
evidence regarding the link between cross-border investment by state-owned enterprises
and capacity outcomes in target jurisdictions.
Published on December 15, 2020
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