International direct investment and transnational companies are playing bigger roles in the global economy, and their influence in the country's economy cannot be ignored.

Domestic enterprises should try to consolidate overseas resources effectively through foreign investment and set the international market as their target. By these means, enterprises can improve their competitiveness and survive the competition with foreign transnational companies.

Some domestic enterprises have started their process of internationalization by investing in foreign countries, establishing factories there and entering local markets.

As a matter of fact, the increase rate of overseas investment of China is higher than most developing countries. In 1982, total overseas investment was merely US$370 million and there were 43 Chinese-invested enterprises in other countries.

According to the article, since the early 1990s, the figures have increased dramatically. By the end of 2000, total contracted investment reached US$11.2 billion, and the number of enterprises solely owned or jointly owned by Chinese companies in foreign countries grew to 6,296.

Domestic enterprises only started investing overseas since the early 1980s, and met many problems.

Most domestic enterprises investing in other countries do not have obvious advantages over their local competitors, and they are especially weak in the high-tech field.

More than half of Chinese-invested enterprises assembled in developing countries and regions have also had to face vicious competition among themselves.

A large proportion of the companies engage in the processing industry and resource exploration, which are less rewarding compared with high-tech ones.

Domestic enterprises must choose a correct strategy when investing overseas if they want to survive international competition and further develop themselves, the article said.

They should first design their location of investment. Developing countries should continue to be the choice for many Chinese enterprises to invest in. As the major attraction of Chinese investment, developing countries have many good opportunities.

As the biggest developing country, China has a lot of similarities in economy, technology, industrial structure and consumer preference with other developing countries. Such similarities give Chinese factories advantages in local markets.

In fact, some made-in-China products have gained wide popularity in developing countries, like textiles, clothing, daily necessities and stationery.

Domestic enterprises should seize the opportunities in developing countries and continue their investment in countries such as Thailand, Singapore, Malaysia and other Asian neighbours.

At the same time, they should increase their investment in developed countries.

As markets in developed countries are more mature, Chinese investors can gain real benefits, as long as they can survive the intense competition there. Furthermore, the stable societies, fully-grown financial markets, and the detailed and clearly-defined legal systems can help Chinese companies ward off unnecessary risks and costs.

The choice of industry for investment should differ in different regions, said the article.

In developing countries, the investment should mainly be diverted to manufacturing, which is closely related with many departments of a country's national economy. Chinese investment in this area can be very rewarding, and many services can be derived from it.

Compared to most developing countries, China has fairly advanced technology in manufacturing. As the developed countries' investment to developing regions has decreased, China has remarkable market potential if it invests in manufacturing there.

As to the means of investment, Chinese enterprises can choose between setting up new enterprises and buying foreign ones.

The latter has become the major trend of transnational investment since the 1980s.

This means of investment enables Chinese investors to utilize equipment, personnel and intangible assets, as well as existing distribution channels used by foreign enterprises.

( People's Daily May 2, 2002)