Horasis:The Global Visions Community Horasis China and business Asian business Asian business globalization systemic risk sustainability management consulting Asian trade globe visions leadership skills scenario-building World Economic Forum Frank-Jürgen Richter Frank-Jurgen Richter Frank-Juergen Richter Frank Richter
      Home Site Map Email
Home
Philosophy
Management
Events
Contact
Opinions
2017
Asia Needs more Dialogue
Solutions to urban pollution may prove complex
Spread of ESGs could herald new global movement
Investing in quality education is imperative if India wants to reap demographic dividends
China needs to lead in new multi-stakeholder world
China’s B&R initiative leading a resurgence of Asia
Education is key - but long-term: Can we survive?
New wave of robots will be beneficial to all
China needs to continue with its ‘heavy lifting’
Time is right for Chinese firms to invest in Europe
Robots to the rescue for China?
Asian Multinationals are Going Global, But to Where?
China ratchets forward with energy efforts
China’s calm necessary for globalization push
Bridging managerial gaps involves trust-building
China well-placed to power its future through green technology advances
China's new 'springtime' is here
2016
China’s moves show it’s banking on the future
Mindset for action at the G20 summit will be determined by Chinese presidency
Chinese head-hunting intensifies for rare managers that can steer overseas firms
US talk of isolation jars with growing links in Europe and Asia
Electoral rhetoric on global trade not in sync with reality
Is it time to be prudent and consider austerity policies again?
What will we do if we have no oil?
Unlock talent by finding the right fit for a person
The benefits are real and tangible
Trade along China’s ‘One Belt, One Road’ won’t succeed without the currency of trust
Reasons for optimism about the long term
2015
Can big oil go green and win?
Poorer Nations Could Sway Climate Talks
Combating Idleness and Deprivation
How China can be a model of food sustainability for the developing world
Kyoto II – Is it a Done Deal?
A meeting of the two largest economic powers
Why China will experience a 'soft' landing
Beware of superstitions
The Elephant and Dragon move ahead
G-7 target on fossil fuels raises many questions
Why Battle for Net Neutrality in the US Matters Globally
China’s resurgence – the ‘normal new’
Wanted: A managerial culture that embraces cultural differences
China's early education plan a smart investment in the future
The New Normal for China and India
2014
China's infrastructure push offers a sure track to better growth
US-China climate pact a good start, but not quite enough
Rethink the human’s place in the ‘digital revolution’
China springs a carbon surprise
Infrastructure - the invisible hand in full view
Dialogue vital for survival of Iraqi nation
China must nurture a new generation of beautiful minds
Great expectations in China and India
GM Cereals – The Pros and Corns
Time to be Honest about Our Energy Prospects
Weathering the Storm of Climate Change
Making a Big Decision? Beware of Your Biases
West Deserves Better Logistics Infrastructure
Digital Currencies do Represent the Future
From 'Printed' Houses to Wooden Skyscrapers
It’s time to bail out our schools, not our firms
Solution to India’s housing shortage – print new ones!
And the most promising green technologies of 2014 are ...
Transport infrastructure key to domestic, export growth
Oil stopgaps: Not worth risking
2013
Why the US should grant Edward Snowden amnesty
May we be more optimistic!
China headed for another massive social experiment?
A dialogue that worked
Yes, politicians deserve vacations - because we benefit
NPOs, NGOs invaluable as creators of dialogue
Look closer and ask: Is America reinventing itself?
Boston bombings case underlines need for dialogue
Millennium Development Goals or own goals?
As usual it's about balance - and timing - of course
Chinese strategists make right moves for growth
2012
Preparing for tomorrow
Austerity or growth?
Japan in danger of becoming 'just a place to fly over'
Beware of the business cycle?
An inconvenient truth
Limited offer sale: Buy a country
Where did our money go?
Leading from behind - a year of elections is almost over
Driving towards a green future
Waiting for springtime
Preserve or Perish
Startlingly similar Asia policy for Obama, Romney
Globalisation remains an irresistible trend
Google has the edge in smartphone war
U.S. Braces for China's Rise
Mankind’s General Scourge
The summer holidays are over and nothing has changed!
Put the hidden trillions to work
Making sense of India’s woes and wonders
Storm in a teacup!
Let’s give bad bankers a venue to admit their sins
News is about depth, not puff or velocity
Booming India, but too few toilets
Delayed Court decisions doesn't mean one may continue to play 'Great Game'
We need media to reflect on data and offer public a balanced view
Big polluters can lead in forging common purpose
The weighty issue of choosing a leader
EU-India Relations - Facing similar challenges
Educating with a goal
The Judicial Malaise
We are growing out, but not growing up
EU´s retrenchment enigma
Urbulence in the Eurozone and the effect on SMEs
Skolkovo May Help Russia to Diversify
Make things more effective
Tapping into the Commonwealth connection
Innovative models for public finance
Facebook revolution but Indian style
The feel-good factor
Asian investors - a private equity opportunity
India needs to be taller and stronger
China´s low sales volume...
Nations playing leapfrog
Shafts of sunlight
What webs we weave
As performers go to Davos, the circus steals the show
Can we control the politicians?
2011
Europe’s reminiscence
China firms should go for win-win in overseas ventures
Of procrastination...
Making sense of profiteering
Truth about financial mess must be laid bare
Small is also beautiful
China can help Europe with debt crisis
Excising the cancer of global corruption
Education, a critical asset
Arab uprisings set in motion forces of creative destruction
A new era of change
We must ensure better education for all
Beijing wary of bankrolling a lost cause
Asean's re-emergence as a local and global leader
Why India's Role in the Global Economy is Still Work in Progress
Its the leadership, stupid!
Reverse globalisation: The new buzzword
China firms should go for win-win in overseas ventures
By Frank-Jürgen Richter
Business Times, December 14, 2011
 

In looking at China's economy, one of the notable trends in recent years is that it is increasingly looking outside its national borders for new growth. But such ventures hold new perils for China that it needs to manage.

China has had considerable success with two forms of globalisation - becoming a global exporter, and more recently by undertaking overseas direct investment (ODI) through which the next wave of Chinese companies will embrace corporate globalisation.

Chinese companies will need to overcome four major challenges in pursuing this type of globalisation. First, they will have to develop world-class financial skills and risk management; second, they have to develop the human skills needed to manage information flows in horizontal organisations which currently are not recognised in their hierarchical command and control systems; third, the new firms will have to compete through product differentiation, not only on low costs; and fourth, they will have to overcome political barriers to global acquisitions since outsiders perceive the real owner of the Chinese firm to be the state and so will be reluctant to cede control to a foreign government.

Peter Buckley, a British professor, undertook a persuasive analysis of the behaviour of Chinese firms. The results may seem critical of China, but are not meant to be; they simply reflect the fact that China is distinctive from other emerging economies due partly to many of its multinational enterprises remaining in state hands - even though they are corporatised in order to focus on commercial objectives.

State direction means that these firms still align their operations, whether at home or abroad, with the country's five-year plans and national imperatives. This is a model that is not prevalent in any of the other leading emerging economies.

Noting this fact, critics point out that Chinese firms are able to enter markets deemed risky only because they have 'infinite' financial backing from the state. At a recent meeting organised by Horasis in Valencia in early November, we heard that the manner of Chinese ODI is sometimes unsettling to African managers. They note that the Chinese essentially offer a barter plan - for example, building roads and hospitals in return for extracting raw materials.

There is also a lot of angst about the fact that Chinese firms tend to employ mostly Chinese workers instead of helping develop local skills.If the Chinese use equipment that is dismantled at home and re-assembled overseas, it is highly likely they need Chinese operators to do the job, especially if the instructions are written in Chinese. Nevertheless, the deployment of too many Chinese operators is meeting with opposition in host countries.

In some industries, such as banking, where there is considerable local talent, the reliance of Chinese entities on Chinese staff is a matter of particular concern to locals. Françoise Nicolas, a French professor, concluded from a study of Chinese firms in France that ' . . . Chinese enterprises are still at a trial and error stage in their foreign ventures'. 'They are still learning, sometimes the hard way, and cross-border acquisitions remain daunting to many Chinese companies. Most of their executives have little experience with M&A, and even less trying to manage across cultures . . . they also lack experience in assessing the potential costs and benefits of a cross-border acquisition.' And Valeria Gattai, a professor from Italy, found that Chinese companies in Italy '. . . lament (the) cultural distance, bureaucracy and the lack of flexibility in the Italian market'. Thus, successful ODI is not simply a matter of money. The human side is also important, as is the capacity to adapt to local cultures. As Buckley noted, the Chinese ODI seems to concentrate on regions that have similar characteristics to China - which are unconstrained by the ethical and governance obligations that are expected of western firms investing abroad.

However, unlike western firms, Chinese firms are comfortable operating in highly regulated and controlled local markets (as they do back in China). While Chinese firms are in many ways successful with their ODI, they need to be more sensitive to the fact that they cannot ride rough-shod over local systems and cultures simply because a host country is looking for inward investment. Their ventures abroad are joint ventures and need to be pursued in a spirit of partnership in which both Chinese firms and their hosts are winners, and seen to be so.

 

The writer is founder and chairman of Horasis, which hosts the annual Global China Business Meeting


Horasis is a global visions community committed to enact visions for a sustainable future. (http://www.horasis.org)

For more information, please contact:
 
Communications and Public Affairs
Horasis. The Global Visions Community
phone: +41 79 305 3110
fax: +41 44 214 6502
e-mail: visions@horasis.org
 
 
Copyright © 2005 Horasis Web by Toronto Web Design