Columbia FDI Perspectives

Perspectives on topical foreign direct investment issues by

the Vale Columbia Center on Sustainable International Investment

No. 64   April 2, 2012

Editor-in-Chief: Karl P. Sauvant ([log in to unmask])

Managing Editor: Jennifer Reimer ([log in to unmask])

State-controlled entities control nearly US$ 2 trillion in foreign assets


Karl P. Sauvant and Jonathan Strauss*


Developing country sovereign wealth funds (SWFs) as players in the world foreign direct investment (FDI) market have received considerable attention. While outward FDI from emerging markets has indeed risen dramatically,[1] that by SWFs has been negligible: their outward FDI stock is around US$ 100 billion (compared to a world FDI stock of US$ 20 trillion in 2010).[2]


On the other hand, state-owned enterprises (SOEs)[3] -- another class of state-controlled entities (SCEs) -- are serious players in the world FDI market. UNCTAD identified more than 650 SOEs that are multinational enterprises (MNEs).[4] They hail from both emerging markets and developed countries.[5] (There are also many important financial SOEs that are MNEs.)


More specifically, research on the 200 largest non-financial MNEs identified by UNCTAD for 2010[6] yields 49 SOEs that are MNEs (see the supporting tables attached to this Perspective at The 2010 foreign assets[7] of these 49 together account for US$ 1.8 trillion, with US$ 1.1 trillion in aggregate foreign revenue. Of these 49:


  • 23 were at least 50% owned directly or indirectly by states; their foreign assets were US$ 570 billion.
  • If the state ownership threshold is lowered to 10%, 26 more firms are added; their foreign assets were US$ 1.16 trillion.


20 of the 49 SOEs are headquartered in developed countries and 29 in emerging markets, with foreign assets of US$ 1.4 trillion and US$ 0.4 trillion, respectively. They operate in many sectors.[8]


Thus, SOEs are among leading players in the world FDI market. They are more numerous among the leading MNEs headquartered in emerging markets, but the foreign assets of those headquartered in developed countries are considerably higher than those of the SOEs from emerging markets.


FDI by SOEs is likely to grow further. For example, in the case of China -- in 2010 the world’s fourth largest outward investor in terms of flows (not counting Hong Kong) -- SOEs control the bulk of the country’s growing outward FDI; one prediction is that Chinese firms will invest US$ 1-2 trillion abroad over the coming decade.[9] To that, one would have to add the likely growth of FDI by SWFs.


Not surprisingly, regulatory attention has begun to focus on FDI by SCEs. It is fueled by the concern that SCEs may pursue objectives other than commercial interests[10] (and therefore might constitute a national security risk for host countries) and that they receive benefits from their governments that put them into a competitive advantage vis-à-vis their private counterparts.[11] To address the first concern, especially developed countries have passed laws or clarified regulations that foresee special treatment for SCEs, creating a separate class of foreign investors. An example is the Foreign Investment and National Security Act of the United States: it establishes a presumption that an investigation needs to be undertaken by the Committee on Foreign Investment in the United States if a merger or acquisition in the United States is undertaken by a SCE. (It remains to be seen to what extent this kind of distinction is permitted in light of international investment law.) The second concern has given rise to a discussion of “competitive neutrality.”

FDI can make an important contribution to economic growth and development. There is no systematic evidence that such investment by SCEs cannot make the same contribution that private firms can make. The special treatment that seems to be emerging for these entities needs to be watched carefully, including from the perspective as to what extent such a fragmentation in the treatment of a certain class of foreign investors serves the broader and longer-term purposes of a non-discriminatory international investment law regime.

The material in this Perspective may be reprinted if accompanied by the following acknowledgment: “Karl P. Sauvant and Jonathan Strauss, ‘State-controlled entities control nearly US$ 2 trillion in foreign assets,’ Columbia FDI Perspectives, No. 64, April 2, 2012. Reprinted with permission from the Vale Columbia Center on Sustainable International Investment (” A copy should kindly be sent to the Vale Columbia Center at [log in to unmask]


* Karl P. Sauvant ([log in to unmask]) is Senior Fellow, Vale Columbia Center on Sustainable International Investment (VCC), Columbia Law School/The Earth Institute, Columbia University; Jonathan Strauss ([log in to unmask]) is a former Fellow of VCC and is currently completing an LL.M. in Law and Entrepreneurship at Duke University. We gratefully acknowledge the important cooperation of Jane Park in the preparation of this Perspective, as well as the assistance of Martin Delaroche, Ge Shunqi, Stephen Gelb, Jens Klingfurt, Alexey Kuznetsov, Joanne Lim, Premila Nazareth, Rajah Rasiah, and Hsia Hua Sheng. We also acknowledge with gratitude the very helpful peer review feedback from Persa Economou, Curtis Milhaupt and Wesley Scholz. The views expressed by the author of this Perspective do not necessarily reflect the opinions of Columbia University or its partners and supporters. Columbia FDI Perspectives (ISSN 2158-3579) is a peer-reviewed series.

[1] See e.g., Karl P. Sauvant et al., eds., Foreign Direct Investment from Emerging Markets (New York: Macmillan, 2010).

[2]  UNCTAD, World Investment Report 2011 (Geneva: UNCTAD, 2011).

[3] Following UNCTAD, ibid., p. 28, “SOEs” are defined as enterprises in which the government has a controlling interest, with “control” defined as a stake of 10% or more of voting power. Ownership can be direct or indirect (including through e. g. government-controlled pension funds, other government-owned firms) or involve special circumstances (e.g. golden shares). It can be passive, even if a government holds (directly or indirectly) more than half of the shares. “SOE” should therefore be read accordingly -- and it draws attention to the need for research on this matter.

[4] Ibid.

[5] The country classification follows UNCTAD, ibid.

[6] Ibid. The firms researched were the 100 largest non-financial MNEs globally and the 100 largest non-financial MNEs headquartered in emerging markets, ranked by foreign assets.

[7] “Foreign assets” of MNEs are the current and fixed assets abroad that they control. They are usually much larger than their outward FDI.

[8] The three most important are: natural resources (12); telecommunications (10); utilities (6).

[9] Thilo Hanemann and Daniel Rosen, “Chinese FDI in the United States is taking off: How to maximize its benefits?,” Columbia FDI Perspective, No. 49, October 24, 2011, p. 2.

[10] See Karl P. Sauvant, Lisa E. Sachs and Wouter P.F. Schmit Jongbloed, eds., Sovereign Investment: Concerns and Policy Reactions (New York: OUP, forthcoming).

[11] However, non-SCE MNEs also receive a range of benefits.

For further information please contact: Vale Columbia Center on Sustainable International Investment, Jennifer Reimer, [log in to unmask] or [log in to unmask].


The Vale Columbia Center on Sustainable International Investment (VCC –, led by Ms. Lisa Sachs, is a joint center of Columbia Law School and The Earth Institute at Columbia University. It seeks to be a leader on issues related to foreign direct investment (FDI) in the global economy. VCC focuses on the analysis and teaching of the implications of FDI for public policy and international investment law.



Most recent Columbia FDI Perspectives

·       No. 63, Miguel Pérez Ludeña, “Is Chinese FDI pushing Latin America into natural resources?,” March 19, 2012.

·       No. 62, Karl P. Sauvant, Chen Zhao and Xiaoying Huo, “The unbalanced dragon: China’s uneven provincial and regional FDI performance,” March 5, 2012.

·       No. 61, Clint Peinhardt and Todd Allee, “Different investment treaties, different effects,” Februrar 20, 2012.

·       No. 60, Alice Amsden, “National companies or foreign affiliates: Whose contribution to growth is greater?, February 13, 2012.

·       No. 59, Gus Van Harten, “The (lack of) women arbitrators in investment treaty arbitration,” February 6, 2012.

·       No. 58, Stephan W. Schill, “The public law challenge: Killing or rethinking international investment law?,” January 30, 2012.

·       No. 57, Seev Hirsch, “Nation states and nationality of MNEs,” January 23, 2012.

·       No. 56, Tadahiro Asami, “Towards the successful implementation of the updated OECD Guidelines for Multinational Enterprises,” January 17, 2012.

·       No. 55, Mira Wilkins, “FDI stocks are a biased measure of MNE affiliate activity: A response,” January 9, 2012.

·       No. 54, Kenneth P. Thomas, “Investment incentives and the global competition for capital,” December 30, 2012.


All previous FDI Perspectives are available at

Karl P. Sauvant, Ph.D.
Senior Fellow
Vale Columbia Center on Sustainable International Investment
Columbia Law School - Earth Institute
Columbia University
435 West 116th Street, Rm. JGH 638
New York, NY 10027
Ph: (212) 854-0689
Fax: (212) 854-7946

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The Yearbook on International Investment Law and Policy 2010-2011 was released by Oxford University Press in December 2011. For details please see
The following ebooks are available free of charge from the same website: FDI Perspectives: Issues in International Investment; Inward and Outward FDI Country Profiles; MNEs from Emerging Markets: New Players in the World FDI Market.

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