Chinese companies going abroad are mostly new kids at the block for domestic and international companies. How to look at them, was a question consultant Joel Backaler, author of China Goes West: Everything You Need to Know About Chinese Companies Going Global often got. His third installment of his post-Europe trip.
From the corporate perspective, this means Western multinationals will increasingly find Chinese companies taking on new roles in the international business landscape. Their new relationships with Chinese firms will vary depending on whether the Chinese firm is a competitor, partner, or owner.
The extent to which Chinese firms compete on equal footing will be determined by the level of oversight and regulation provided by the government where the investment occurs. In advanced economies like the US and EU where regulations are more strictly enforced than many emerging markets, Chinese firms do not play by a separate set of rules – and if they attempt to do so, they will face consequences. Take the case of Sinovel, a Chinese wind turbine producer that divested its U.S. operations last July after it was charged in federal court with stealing trade secrets from its former U.S. supplier.
Over the course of my trip and during my ongoing interactions with my firm’s clients, I find that more and more Western multinationals are interested in identifying ways to partner with Chinese companies overseas. Western firms should proceed with caution.
To cite just one example, Hollywood studios like DreamWorks and Chinese firms like Alibaba and Dalian Wanda are forming partnerships at a rapid pace. As collaboration between Hollywood and Chinese firms deepens over time, it will be interesting to see the impact these partnerships have on the Chinese movie production industry. What will happen when Chinese firms begin producing blockbuster international films of their own?
Last year I was surprised to discover that a former client, Virginia-based Smithfield Foods, had been acquired by Shuanghui International, a Chinese pork producer. Smithfield is not the only American firm to be acquired by a Chinese company and it surely won’t be the last. Chinese ownership presents a unique alternative for American companies seeking strategic investment beyond traditional routes like private equity investment or acquisition by a larger domestic industry incumbent.
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