Can Chinese companies join a global market, especially in developed countries, is often asked 2014 is going to be the year where we can see large movements, argues author Joel Backaler in Forbes. He discusses the five key relationships Chinese firms have to master to enter the West. Here are the first two.
2014 is set to be another active year for Chinese overseas investment, particularly in the United States. Lenovo is already making headlines for two major tech deals involving IBM’s x86 server division and the Motorola Mobility handset division from Google. Lesser-known Chinese automotive firm Wanxiang won a bid for bankrupt hybrid sports car manufacturer Fisker Automotive on February 14. Three days later, Chinese jewelry retailer Goldleaf announced a $665 million acquisition of Texas-based ERG Resources LLC – an oil and gas operator. Will these deals prove successful in the years to come?
Here are two of the five relationships Chinese firms need to master to go west, according to Joel Backaler.
Company to Government
Chinese firms often struggle to understand local regulations and the different roles played by government actors—both at home and in host countries of investment. In China, companies need to work closely with a complex web of government agencies including the National Development and Reform Commission (NDRC), the Ministry of Commerce (MOFCOM), and the State Administration of Foreign Exchange (SAFE). Firms engage directly and regularly with local and central governments, and they may receive financial or political support for their expansion abroad. In Western markets, Chinese companies often expect a similar level of investment guidance from overseas governments. However, they may be surprised to find the answers they seek lie instead with local professional services firms offering counsel on work permits, labor laws, tax regulations, and accounting for a handsome fee.
Company to Employee
Early in their international expansion, Chinese firms may find it challenging to hire, manage and retain staff overseas. This could result from employing Chinese managers without the appropriate decision-making autonomy, exposure to the local culture, or relevant management experience. For example, Mark McMillan, the former director of design engineering for athletic apparel producer Li-Ning’s American subsidiary, was promoted by his American boss to a global role based in Beijing. After his promotion had been communicated to the entire US office, Beijing-based management withdrew the offer because they didn’t agree with McMillan’s supervisor’s assessment.
Joel Backaler is the author of an upcoming book “China Goes West. Everything You Need to Know About Chinese Companies Going Global” and a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers´request form.
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