State-owned multinational enterprises (SO-MNEs) have become a major engine of global FDI as they increase their international presence in the search for new markets and insight into the technological and human knowledge of target companies.

Mostly scattered across Europe and the developing world, they made up 9% of the global greenfield foreign investment announced between 2010 and 2016, according to data from greenfield investment monitor fDi Markets.


The amount of political control over SO-MNEs ranges from 100% participation, as is often the case for state groups from Asia, to minority participation or golden shares, which are more typical of SO-MNEs in Europe.

SO-MNEs’ level of political influence varies accordingly, but is always present to some degree. This is raising challenges and regulatory concerns for authorities across the globe, leading them to question the real nature and purpose of these investments.  

A question of politics

There are about 1500 SO-MNEs active in the world economy, with more than 86,000 foreign affiliates around the globe, according to estimates by Unctad. The total number is small compared with the overall universe of multinational corporations (MNCs) at only 1.5%. Yet the figures do not tell the whole story, as 15 of the top 100 non-financial MNCs and 41 of the top 100 MNCs from developing and transition economies are state-owned.

More than half of total SO-MNEs are headquartered in developing countries. The profound influence of the Chinese state in its economy is reflected in its 257 SO-MNEs. The same goes for Malaysia, which is home to 79, India (61), South Africa (55), Russia (51) and the United Arab Emirates (50).

While the US and Australia have no such groups, the EU is a major base for SO-MNEs, since the combination of private and public capital is a trademark of the European route to a market economy. A total 420 SO-MNEs are headquartered in the EU, with Sweden leading the way at 49, followed by France (45), Italy (44) and Germany (43).

Global European groups such as Volkswagen, Eni and Enel – where national authorities retain power of veto over key strategic issues – lead the list of non-financial SO-MNEs for foreign assets, according to Unctad. Conversely, China’s giant state banks lead the pack in the financial SO-MNEs ranking, with Industrial and Commercial Bank of China being the largest of eight Chinese banks in the world’s top 10 for foreign assets. 

Increasing FDI push

“The value of announced greenfield projects by SO-MNEs is large and rising,” says a 2017 Unctad report. Over the period 2010 to 2016, the total value of SO-MNEs’ announced projects reached $514bn, well over 9% of the world total, and increased particularly in 2015 and 2016, Unctad estimates using fDi Markets data.

These projects heralded the creation of the equivalent of more than 100,000 jobs per year (with a record of 120,000 in 2016), making them a key force of employment in a range of developed and developing host countries. The utilities, automotive and transportation sectors accounted for 60% of the total value of announced projects between 2010 and 2016.

SO-MNEs’ global reach has also expanded through a burst of international mergers and acquisitions. ChemChina, for example, hit the headlines earlier in 2017 for its $43bn takeover of agricultural technology giant Syngenta, a deal that set alarm bells ringing among authorities in both Europe and the US for its scale and scope.

Combined with the overall push by Chinese SO-MNEs into foreign domestic markets, such activity has fuelled a debate over SO-MNEs’ global investment, and how independent (or not) these companies are from political influence.

Hidden influence

“The degree to which governments influence the decisions of SO-MNEs does not depend only on percentage ownership, but also on foreign expansion strategy,” says the Unctad report.

“The political and economic environment in home countries – for instance, the degree of free-market policies or interventionism – influences the relationship between states and their MNCs. The home country’s level of development also influences the internationalisation of SO-MNEs, with the probability of state intervention higher in less developed countries: in some cases, the government might discourage FDI by its SO-MNEs, as this could reduce their contribution (for example, social, industrial) to the domestic economy; in other cases, the state might be ready to support FDI to help build economies of scale and further enhance the competitive position of its MNEs and that of the home country.”

Independent of the ownership structure, most SO-MNEs are clearly politicised. State authorities have direct control over 63% of the world’s SO-MNEs through a majority participation of more than 51% of their shares. They retain a high degree of influence over the remaining 37% of companies, where they own less than 50% of their capital, by being the single largest shareholder or having power of veto, or golden share, over key strategic decisions.

This influence manifests itself in very different ways. China’s SO-MNEs are spearheading Beijing’s ‘Go global’ push. More generally, developing world SO-MNEs are increasingly answering their governments’ call to acquire foreign expertise to upgrade their home economies. Developed world SO-MNEs are focused on gaining control over strategic, and also profitable, telecommunications and power infrastructure, as well as natural resources.

Policy issues

Beyond their specific reasons, the increasingly global footprint of SO-MNEs raises particular policy issues in host countries related to their ownership. These include concerns about national security, competition, governance, social and environmental standards, the impact on host-country development and industrial policies, and the transparency of transactions, says Unctad. 

These issues were at the heart of a recent dispute between France and Italy over a proposed takeover by Fincantieri, an Italian state-controlled shipbuilder, of STX France, which owns a shipyard on the France’s Atlantic coast. French president Emmanuel Macron has long opposed the deal amid concerns of technology transfer to the Chinese, since Fincantieri closed a major joint venture with China State Shipbuilding Corp earlier in 2017.

The deal was eventually settled in September, after weeks of negotiations between the two governments, through a shared ownership agreement. The dispute embodies the debate developing at a national and European level that has seen EU commissioner Jean-Claude Juncker championing the establishment of a legal regional framework whereby national government can block takeovers by foreign companies on the basis of national security, competition and other concerns. The US’s Committee on Foreign Investment is also intensifying its scrutiny of foreign takeover on the grounds of security concerns, along other countries around the world, from Australia to Israel.

It seems SO-MNEs have become victims of the success of their international ambitions. They must now learn to play by the rules, above and beyond political influence, if they are to remain a major force in global capitalism.