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China Goes West: 4 Perspectives on Chinese Outbound Investment.

Joel on June 3, 2014 - 6:24 pm in Insights

I have just returned from an extensive China roadshow promoting my new book, China Goes West: Everything You Need to know about Chinese Companies Going Global. The timing of the trip coincided with Putin’s visit and the United States’ charging five Chinese officials with cyber espionage. I kicked off my tour in Beijing where I spoke in front of more than 200 people in my first week at organizations such as the American Chamber of Commerce, the European Union Chamber of Commerce and the Carnegie Endowment’s center at Tsinghua University. One of the greatest parts of the trip was interacting with attendees at each of these events to hear their perspectives on Chinese outbound investment. Not surprisingly, much of what I heard echoes the sentiment of individuals I interviewed over the course of my book research.

Carnegie Tsinghua

The following are four perspectives on Chinese outbound investment from week one:

1. Chinese Competition: The Western Multinational Executive

In addition to events, I met with many American and European senior executives at their Beijing offices to discuss the topic of intensifying Chinese competition. At a workshop my firm organized in Shanghai last month 41% of the 40 executives in attendance attributed Chinese competition as having the greatest impact on their ability to hit 2014 targets. Increasingly though, this competition is occurring not just within China, but in other emerging markets and in developed markets like the United States and European Union. Based on the level of interest during these conversations in Beijing, it’s clear to me that theme of “Chinese firms as both local and global competitors” will be top of mind for Western multinational executive for the foreseeable future. In fact, The Economist cover story from this past week completely supports this prediction. 

2. Investment Recruitment: The European Ambassador

After my speech at the Carnegie Tsinghua Center, Ireland’s ambassador to China came up to me to discuss the topic of investment recruitment. While American and European executives are building plans to fend off Chinese competition, government officials are in the process of opening the doors for more and more investment from Chinese firms to add jobs, increase tax revenues and improve infrastructure. These are all very tangible economic benefits for the recipient nations of Chinese outbound investment; however, in my book I remind readers of a famous quote by Chinese economic reformer, Deng Xiaoping: “when you open the window, fresh air will come in, but so will some flies” – i.e. increased foreign direct investment will certainly lead to benefits, but negative “flies” can come in as well. Top concerns related to Chinese outbound investment include national security, cyber-security, anti-competitiveness, among others.

Deng Xiaoping

3. Global Brand Building: The American Public Relations Director

One of the attendees of my talk at the American Chamber of Commerce works as a director at a large multinational public relations firm. His firm just started a “China Global” practice focused on securing Chinese clients to help with their international expansion efforts. He asked how his and other professional services firms in the marketing and branding space could win business as a result of Chinese companies going overseas.  I told him about a joke a China PR expert told me during my research, “for many Chinese companies ‘branding’ means getting a new logo, ‘advertising’ means buying ads on China Central Television, and ‘P.R.’ stands for…pay the reporter.” While the joke is obviously a generalization it does illustrate the general lack of emphasis most Chinese firms place on investing in brands as a long-term strategic asset – this is why his firm is having a difficult time winning business.

4. Post-Merger Integration: The Chinese Global Executive

My last speech in Beijing was at the Cheung Kong eMBA program which highlighted the Chinese side of outbound investment. The vast majority of the 80 attendees were C-level executives from top Chinese firms pursuing their MBA primarily to learn how to globalize their businesses. After a keynote speech to open up the session, I was joined on stage by a senior vice president from the Chinese firm TCL, a consumer electronics firm. We discussed the topic of outbound M&A and the many challenges that Chinese companies tend to face in the process. My counterpart from TCL described many of the challenges I wrote about in my book based on his own experience buying firms in the US and France. He expressed concerns about over-paying for acquisition targets, challenges along the management visit stage and difficulties incorporating global executives into his Chinese organization.

Keep an eye out for more posts with key takeaways from my recent trip. If you’re interested in purchasing a copy of China Goes West – you can find it on Amazon today.

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