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China need to address difficulties as more companies go global

Thursday,Dec 01, 2016

From: Global Times

 

In 2015, China’s outbound direct investment grew by 18.3 percent year-on-year to $145.7 billion, entering a golden era and for the first time ranking second globally. China also became a net exporter of capital for the first time in 2015.

Despite the overseas investment highlights for Chinese enterprises, there are still difficulties that need to be addressed during their attempts at going global.

First, political risks - normally caused by instability in a country’s politics, policies and foreign exchange system - affect Chinese enterprises’ foreign investment and the security of the Chinese economy. Chinese firms need to facilitate evaluations of security risks in their overseas investment and establish a mechanism that manages overseas emergencies. The Chinese government needs to improve the insurance mechanism in case Chinese firms encounter overseas political risks, including the issuance of insurance that covers risks both on the policy and commercial levels, and the signing of agreements on mutual protection of investments.

Second, Chinese firms’ participation in setting international standards still lag behind developed economies  which has impacted their overseas operations and development.

In this respect, Chinese firms need to revise existing standards, enhance technical communication within industries and establish an effective system of standards for their products based on market and client needs. Additionally, further government funding to cultivate relevant expertise that promotes Chinese standards to go global is needed. The government also needs to facilitate international communication, set up relevant institutes for standardization and improve its translation mechanism that foreign professionals can refer to.

Third, as many Chinese firms are not familiar with the operation of host countries’ labor unions, the interests of Chinese firms can be seriously hurt by inadequate communication with unions. During overseas negotiations, Chinese firms need to actively seek consensus with local unions and respond to their concerns. The Chinese government should play a role that bridges domestic firms’ investment with the needs of local governments in foreign countries, step in when necessary to relieve pressure from unions and help Chinese firms in diplomacy.

Fourth, the insufficient employment of foreign professionals by Chinese firms could hinder their outward investment. When it comes to implementing international strategies, domestic companies are advised to form an international team at the senior management level, try their best to retain local employees after overseas mergers and acquisitions and require Chinese employees to adapt to the local environment. To attract international talent, the threshold on the application for a Chinese green card could be lowered. The government could also provide a platform for former diplomats and commercial counselors to consult with domestic firms in their overseas endeavors.

The article was compiled by Global Times reporter Wang Wei based on the Report on Chinese Enterprise Globalization recently released by the Beijing-based think tank Center for China and Globalization. bizopinion@globaltimes.com.cn

 

 

 

 

 

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