Contradictions in cross-border investment in China in the 2010s: the role of intermediaries

This article analyses how financial intermediaries explored contradictions between Chinese political, economic and social specificities and the standards of global financial practice, in a way that fostered the growth of China's share in global foreign direct investment (FDI) during the 2010s. During this period, China's share in global outbound FDI increased sharply, so that China became the second largest recipient of FDI and the third largest source of FDI worldwide. The article is based on qualitative research with financial professionals working in cross-border mergers and acquisitions and in venture capital and private equity funds during the 2010s. Drawing on the literature on financial intermediaries, FDI drivers and the political economy of China, it examines how these intermediaries transformed their investment rationales and used the malleability of standardized organizational forms to integrate understandings and interests that were often divergent or contradictory. These concern the contradiction between the priority that financial procedures give to the maximization of investment returns and market efficiency, against the central role played by the Chinese state, the Communist Party of China and state-owned enterprises. This role lies in a combination of profit-oriented discipline and policy aims concerning the transformation of the economic structure, poverty reduction, middle-class consumption, technological advancement, nation-building and geopolitical confrontations. The analysis allows us to understand financial intermediaries' capacity to create transaction opportunities in the face of contradictions and oppositions, as well as how they fostered the rise of China in global FDI without the country fulfilling the liberal hopes of financial globalization that had marked the two decades after 1990.