The Mountains Are High But the Emperor Is Not Far Away: The Escalation in Political Control Over Chinese SOE Outbound Investments

This chapter examines the escalation of political control over Chinese SOEs and their outbound Foreign Direct Investment (FDI) in light of the latest round of SOE reforms. Despite the growing significance of private outbound FDI since China’s WTO accession in 2001, SOEs continue to dominate China’s outbound investment landscape. This chapter explores how the tightening political control through recent reforms has shaped SOEs’ outbound investment strategies and operations. The research identifies key institutional pressures exerted on Chinese SOEs’ FDI decision-making, focusing on the enhanced political control embedded in SOE governance systems, the policy tasks assigned to SOEs designated as State-owned Capital Investment and Operation Companies (SCIOs), and the multi-layered administrative approval processes for outbound investments. The chapter further highlights the role of core companies within business groups as intermediaries between the government and SOE subsidiaries, facilitating political oversight over overseas operations. This chapter shows how political influence permeates the entire FDI process, ensuring that SOE investments align with national policies and government directives. The findings underscore the growing significance of Chinese SOE FDI in the global economy and provide insights into how host countries can address the challenges posed by political influence in Chinese SOE investments.