China’s going global

Chinese companies are going global. Amid a lacklustre local market and increased competitiveness, China’s business leaders are increasingly looking beyond the country’s borders to find international opportunities. They are not only stepping up the export of goods from inside China, but also directly investing in other countries and setting up local subsidiaries.

It is a trend that will have global consequences, as sizeable businesses from the world’s second largest economy develop a greater presence in the global market. For Chinese companies, going overseas adds another growth driver, while the countries receiving investment enjoy benefits such as domestic employment, as well as locally produced goods at a low price.

Chinese companies are still at the early stages of their international journey. Only 10.3% of the total revenues for companies in the CSI 300 Index come from overseas¹. This is low compared to the benchmarks of other export-dependent countries – such as Germany and Japan. Furthermore, China’s outward direct investment has room to expand as its GDP per capita grows.

The trend of Chinese companies going global was the subject of a panel discussion at the HSBC 11th Annual China Conference, which brought together a range of senior business leaders to share their experience on overseas expansion.

Success stories

Mindray Bio-Medical Electronics is a medical equipment and solution supplier. It started its global journey more than 20 years ago, when it started exporting to the UK. Since then, it has enjoyed strong business performance with an growing international presence. It serves more 190 countries and regions, via 60 subsidiaries around the world, employing over 18,000 employees from 30 countries².

The Shenzhen-based company now makes 39% of its revenues from overseas. And as a company that constantly develops new products, it has integrated research into its international operations, with 12 R&D centres worldwide.

“What we are doing is to trying to solve the urgent medical challenges faced by the global community, and when as solve more of these challenges, our business will naturally grow,” said May Li, Board Secretary and Director of the Board Office, Mindray Bio-Medical Electronics.

As Asia’s largest integrated logistics service provider, SF Holdings describes its ambition as “to become the One in Asia”. In other words, it wants to become the first name in mind for clients with logistics needs across the region.

The focus on Asia is due to the rapid growth in the market presenting significant structural opportunities, said Ling Gan, Deputy General Manager and Board Secretary, SF Holdings. Just as major logistics companies grew alongside the global expansion of US or EU companies back in the 1970s, SF is currently seizing the historic opportunity to facilitate Chinese companies expanding overseas and assisting multinationals to diversify their supply chains across Asia.

The final company on the panel was Lens Technology, a one-stop original design manufacturer (ODM) precision manufacturing enterprise providing appearance parts, structural parts, functional modules, and complete assembly for the consumer electronics and new energy vehicle industries. It holds an important position in the global supply chain.

The company's clients are internationally renowned brands, which led Lens Technology to pursue internationalization early on. It has international subsidiaries in Korea, Japan, and the United States, and a manufacturing plant in Vietnam. Established in 2017, this plant currently employs 5,500 people, continuously contributing profits to the parent company, creating local jobs, and driving the development of high-end industries in the region.

As more multinational manufacturers like Lens Technology establish roots in Vietnam, local workers can transition from farming to factory work, significantly increasing their income levels and promoting economic development, achieving a win-win situation.

Addressing the challenges

Perhaps the biggest challenge facing Chinese companies on their international endeavours is geopolitics, which range from tariffs and anti-dumping investigations to supply chain disruptions.

Protectionism in key export markets appears to be deeply rooted, which means that restrictive trading policies and supply chain issues will likely remain in place for some time. One potential workaround is for Chinese companies to diversify where they make products, as well as the destinations they export to. Deepening trade relations between China and ASEAN countries could play a role here.

Another issue that Chinese companies need to address is cultural difference between the home country and the new markets where it operates. The panel shared the ways that they worked with their new partners abroad.

Mindray’s May Li explained how colleagues around the world can be brought together around a single purpose: “We work together because we have the vision, to address the healthcare challenges that are present everywhere in the world.”

Jiang Nan, President of Lens Technology's China region and Board Secretary, noted that the biggest challenge during the initial phase of its project in Vietnam was the lack of mature local management and technical personnel. During peak production periods, hundreds of technicians had to be dispatched from China for support.

By bringing advanced management experience and production technology from China, Lens Technology has continuously trained local employees over the years, significantly enhancing Vietnam's precision manufacturing capabilities. The proportion of local employees has risen from less than 50% in the first year to over 90% now, greatly reducing the need for technical staff from China, effectively lowering labour costs and improving operational efficiency.

Overcoming these challenges will take time and could require considerable hard work. But Chinese companies will find the effort worthwhile, as it will open up the new markets that could become the growth drivers of the future. And as Chinese companies realise their global ambitions, they will gain an international footprint in the world of international business.