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The Secretary-General of China Overseas Industries Development Association and Zhenwei told China Industry News that the overall risk of manufacturing companies “going out†is increasing. Shen Kaitao, chairman of Jiangtai International Cooperation Association, who has engaged in international cooperation for many years, said that in the face of unpredictable policy risks in overseas markets, a new business environment, and a huge cultural gap, many Chinese companies are in the process of “going outâ€. Hit the wall, even affect the development of the domestic market.
Foreign investment in the manufacturing industry has advanced by leaps and bounds and Zhenwei said that the proportion of foreign investment in China's manufacturing industry has grown by leaps and bounds in the past two years. The total foreign investment of manufacturing enterprises in China’s total foreign investment accounted for 5% to 6% for a long period, and it increased to 12.1% in 2015, and it increased to 18.3% in 2016.
He Zhenwei further stated that the overall risk of manufacturing companies “going out†is increasing, and companies should conduct sufficient market research and work ahead of the “going outâ€. Many manufacturing companies in China complete foreign investment through mergers and acquisitions. In many developed countries, corporate mergers and acquisitions will encounter security restrictions. With the improvement of China’s overall strength and the protection of these countries against their own industries, the risks in this area are increasing.
The second major problem faced by manufacturing companies “going out†is that the integration of Chinese and foreign cultures is not enough. He believes that in the reasons for the failure of mergers and acquisitions in Chinese companies, the proportion of cultural integration is very large. “A lot of companies have done a lot of work before the mergers and acquisitions, and think that the work before the merger and acquisition is the most important. In fact, articles after the merger and acquisition are more important. Many companies because Inadequate consideration of cultural integration has resulted in successful mergers and acquisitions, but the integration has failed.†Companies, especially small and medium-sized enterprises, “going outâ€, difficulties in financing, and information communication are also problems that need to be solved in many ways.
He Zhenwei pointed out at the same time that the "Belt and Road" initiative and international production capacity cooperation have brought a historic opportunity for Chinese enterprises to "go global". At present, the National Development and Reform Commission, as the main leading committee for international capacity cooperation, has delineated 12 industries including iron and steel, non-ferrous metals, building materials, high-speed rail, chemical industry, electric power, light industry, textiles, aerospace, and shipbuilding as key international cooperation cooperation industries. These 12 industries are all manufacturing industries. In the future, in these areas, China's manufacturing foreign investment will have large growth.
Four major risks can not be ignored Recently, the Global Investment and Trade Service Forum was held in Nanjing, Jiangsu. The forum focused on the various risks and problems that need to be solved in the process of global investment and trade services, especially the Chinese enterprises' "going out" process. Many domestic companies have conducted in-depth discussions and exchanges on how to improve the efficiency of overseas operations.
At the forum, Shen Kaitao told the China Industry News reporter that the risks of “going out†are ubiquitous and fall into four categories: economic risks, political and social risks, natural risks, and legal risks. After many companies "go out", the success rate is not very high. The main reason is that companies have underestimated the risk of foreign investment environment, resulting in a lot of undue losses.
Shen Kaitao believes that in the face of unpredictable policy risks in overseas markets, a new business environment, and a huge gap in cultural differences, Chinese companies need to leap over the triple door in the “going out†process: one priority: high political and legal barriers.
"Going out" Chinese companies often lack an in-depth understanding of the local political and legal systems and anticipate potential political risks. In 2015, just because of political instability in foreign countries, there were incidents such as the shutdown of the Myitsong Dam project in Myanmar, the reduction of billions of iron ore in Sino-Australia, and the shelving of Mexico’s high-speed rail projects indefinitely. This caused heavy losses for Chinese companies. In the case of the United States alone, Chinese companies often encounter anti-dumping and countervailing measures, particularly against the low-end products that Chinese companies send to the US market. Utilizing intellectual property rights means, unprovoked suspicions or "connivance" of U.S. corporate reports, detain Chinese products at U.S. Customs, and stop Chinese products from entering the U.S. market, thereby blocking Chinese companies is another common practice. Many “going out†Chinese companies lack understanding of the host country’s environmental laws and regulations and will face high environmental pollution remediation fees if they are careless.
Double doors: language and cultural differences. The primary issue for Chinese companies “going global†is to communicate with users of different languages ​​and cultures, and to market their products and services through local languages. Many companies have suffered huge economic losses in cross-cultural communication and foreign trade because they do not pay attention to language services. They not only lost international market share, but also damaged corporate image and brand. At the same time, the conflict between cultures is also very easy to create contradictions, many companies do not blindly invest in a timely and comprehensive understanding of the customs, customs and beliefs of the host country, often suffer losses, resulting in the failure of cross-border transactions.
Triple Door: lack of human resources. The talent problem can be said to be a difficult point for Chinese companies to "go global." Many companies began to recruit globally after “going outâ€, and they still could not find suitable international talents for a long period of time. Even more "going out" Chinese companies directly send management personnel who do not have the linguistic foundation to acquire companies after mergers and acquisitions, and there are obstacles in language and culture communication with the original management team. In the case of transnational operations, the international dispatch of employees of Chinese companies must also comply with the rules of visas, labor and employment, wages, taxation, industry access, and other fields, which are cumbersome and complicated.
In the past, Chinese companies were not well-informed about international operations, market-oriented competition, and modern financial instruments. It was inevitable that they would lose their lessons and experience. The process of “going global†investment by Chinese companies today requires efficiency. Only by strengthening capacity building can we improve efficiency, and we must not let the high costs of “going global†to drag down companies.
Chinese manufacturing enterprises "going out"
The "going out" of Chinese enterprises has been considered as an effective way to achieve industrial upgrading and capacity transfer. In recent years, under the dual drive of policies and markets, Chinese manufacturing enterprises have become increasingly aggressive in “going global†and the proportion of foreign investment has grown rapidly. The latest statistics from the Ministry of Commerce show that during the first two months of this year, China’s foreign investment dropped 52.8% year-on-year, but investment in the real economy and emerging industries continued to grow. From January to February, foreign investment mainly went to manufacturing, information transmission, software and information technology services.
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