By Wang Huiyao
CCG’s “Report on Chinese Enterprises Globalization (2015)”provides a systematic and comprehensive review of the globalization of Chinese business enterprises from 2014 to 2015. In doing so, the report thoroughly analyzes the various risks and problems these firms face in “going global.” It also summarizes the growing number of success stories in this area, while providing useful policy suggestions addressing the common problems and the risks Chinese companies have encountered in expanding abroad. Last, but certainly not least, the report lists the top 50 established and top 50 emerging Chinese enterprises with respect to globalization.
“Report on Chinese Enterprises Globalization (2015)”consists of Six separate reports: General, Evaluation, Investigative, Special, Solution, and Enterprise Reports. The General Report reviews the current characteristics and trends of both global and Chinese foreign direct investment. Based on the analyses of a wealth of data and information, the report presents suggestions on how to accelerate the trend and efficiency of Chinese business enterprise globalization. In 2014, even though global economy slowed down and overall global foreign investment declined, Chinese outbound investment continued to expand at a rapid pace, exceeding inflows of foreign direct investment into China for the first time, turning the country into a net exporter of capital. In 2014～2015, with the new normal of Chinese economy, Chinese enterprises’“going global” made a new breakthrough In particular, private businesses, whose outbound investments increased at an exceptionally fast pace, became a major element in the mix of globalizing Chinese companies, which had previously been dominated by large state-owned enterprises. Major new players in Chinese enterprise globalization included insurances firms. At the same time, the food and agricultural industries replaced energy as the favorite targets for Chinese enterprises undertaking cross-border mergers and acquisitions. With the proposal and implementation of the Belt and Road Initiative, Chinese companies will enter a new and higher stage with respect to going global. The General Report also puts forward countermeasures for dealing with outbound investment problems and risks, including legislation of outbound investment, enhanced security protection, tax preferences, use of intermediary service agencies, and the greater incorporation of foreign talent into the management of firms expanding abroad.
In Evalutaiton Report, “The Evaluation of Chinese Enterprises Globalization” puts forward an evaluation system of Chinese enterprises outward activities to gauge their globalization. Based on this system, the report selects the Top 50 Chinese established globalizing companies and the top 50 emerging globalizing companies.
The Investigative Report is based on a questionnaire survey and field visits of Chinese firms undertaken by CCG in 2014～2015. The main findings of this investigation are as follows:
·The U.S. and European Union have become the main destinations for Chinese overseas investment;
·The desire to enhance brand value and establish a bigger presence on the international market were the two main factors causing Chinese companies to go global;
·Chinese overseas investment took on a variety of different forms, with mergers and acquisitions being the main form of such activity targeted at the U.S.;
·The main source of funding for Chinese business enterprise globalization was equity funding;
·Most Chinese companies going global have met their investment targets, but many have yet to realize economic gains from doing so;
·Access to global talent was the main factor determining the success or failure of overseas investment projects undertaken by Chinese firms.
The investigative component of the report also shows that outbound investors are most attentive to macro political and economic risks. With respect to economic and political stability, the top three concerns are political security, policy stability, and the legal and institutional environment. To cope with risks in these areas, Chinese firms focus on maintaining a good relationship with local partners and pay close attention to their relationships with labor unions, personnel, media, local officials, and non-profit environmental protection organizations. For Chinese companies investing outward, cultural differences constitute the biggest obstacle they face while operating in foreign settings. Another risk confronted by Chinese firms investing in the U.S. is high labor costs.
In the Special Report, several highly qualified experts undertook comprehensive research on the underlying problems regarding Chinese enterprise globalization. Based on this work, they propose useful solutions for dealing with these problems. The first essay in the special report, “The New Normal Creates New Opportunities for Chinese Enterprises to Invest Outward” analyzes the trends of outbound investment, arguing that China’s business enterprises are entering a promising period of strategic opportunities for outbound investment, due to a favorable global economic situation, which is creating good prospects for such activity. At the same time, the domestic economy of China continues to expand, providing a solid foundation for Chinese companies to go global. National Chinese Government policies have also been a strong impetus for outbound investment. In addition, the Belt and Road Initiative offers great opportunities and space for outbound investment. The second essay, “Cross-border Investment: Comparison between Global Trend and Chinese Trend,” describes the growth of Chinese outbound investment and puts forward proposals for increasing the globalization of Chinese business enterprises. The thirld essay, “The Fallacious Theory and Practice of Foreign Investment Policy Based on Overseas Resource Nationalism,” argues that investment risk is now increasing, due to overseas resource nationalism and incorrect foreign investment policy. The fourth essay, “A Brief Analysis of Tax Pitfalls on Chinese Enterprises Investing in U. S.,” explores the top six tax pitfalls that Chinese enterprises meet when investing in the U. S. It then provides guidance for Chinese firms in managing U.S. taxation policies.
The Solution Report provides legal/legislative, international talent development, financing solutions for Chinese firms going global. “The Influence and Countermeasures of Newly Changed International Investment Rules on Chinese Enterprise Globalization,” introduces several main points. It begins by noting that under the present WTO system, multilateralism has not been able to promote the further development of international investment rules. TPP, TTIP, and RCEP negotiations all appear to be stuck in place. In the meantime, new rules and systems for trade and investment, which correspond to current economic conditions and realities around trade, are coming into being. In these new circumstances, it is worth asking how Chinese enterprises can accelerate their drive to go global. “The Risks and Precautions of Chinese Enterprises globalization,” analyzes the top ten risks that Chinese enterprises often face when going global. Political risk is the biggest risk, while the most commonly encountered one is legal risk. The legal risks can be caused by both objective and subjective factors, with the former being the imperfect laws and legal environments in host investment countries, while the latter grow out of irregularities in the operation of Chinese firms expanding outward. With respect to undertaking globalization, most Chinese business enterprises lack complete and systematic risk identification and avoidance capabilities.“The Exploration and Analysis of Geopolitical Risks of The Belt and Road Initiative,” investigates the sources of geopolitical risk for firms investing in One Belt, One Road related projects. It then provides countermeasure suggestions for dealing with these risks from a number of diverse perspectives.
In Enterprise Report, “The Evaluation of Chinese Enterprises Globalization” puts forward an evaluation system of Chinese enterprises outward activities to gauge their globalization. Based on this system, the report selects the Top 50 Chinese established globalizing companies and the top 50 emerging globalizing companies. And it culls from the Top 50 globalizing companies lists firms like the Wanda Group and China National Chemical Corporation as case studies of successful overseas expansion.
In Enterprise Report, we culls from the Top globalizing companies lists firms like the Wanda Group and China National Chemical Corporation as case studies of successful overseas expansion.
In the appendixes, we select key events of Chinese outbound investment from CCG’s data base. We believe they can help readers to understand the further globalization of Chinese business enterprises.
Ⅰ General Report
1 The Current Characteristics and Trends of Chinese Globalization
【Wang Huiyao, Sun Yuhong and Miao Lv】／001
1. General Situation／002
2. New Characteristics of Global Foreign Direct Investment／004
3. Current Situation of Chinese Enterprises Going Global／011
4. Characteristics and Trends of Chinese Enterprises Going Global／025
5. The Problems of Chinese Enterprises Going Global／033
6. Suggestions on Chinese Enterprises Going Global／040
Ⅱ Evaluation System and Rankings
2 The Evaluation System of Chinese Enterprises Globalization
【Wang Huiyao, Cao Jiajie】／051
3 The Evaluation of Chinese Enterprises Globalization 2015
【CCG Research Group on Enterprises Globalization】／059
Ⅲ Investigation Reports
4 The Investigation of Current Situation on Chinese Enterprises Globalization
【CCG Research Group on Enterprises Globalization】／090
5 The Investigation of Opportunity, Challenge, Risk and Countermeasures on Chinese
Enterprises Globalization【CCG Research Group on Enterprises Globalization】／116
Ⅳ Special Reports
6 The New Normal Creates New Opportunities for Chinese Enterprises to Invest Outward
7 Cross-border Investment: Comparison between Global Trend and Chinese Trend
8 The Fallacious Theory and Practice of Foreign Investment Policy Based on Overseas Resource
9 A Brief Analysis of Tax Pitfalls on Chinese Enterprises Investing in U. S.
【Sun Yuhong, Miao Lv and Cheng Yanjuan】／164
Ⅴ Reports on Strategy Recommendation
10 Solution Report Provides Suggestions from the Perspectives of Legislation
【Wang Huiyao, Miao Lv】／175
11 International Talent Development【Wang Huiyao, Miao Lv】／181
12 Financing for “Going Global” 【Wang Huiyao, Miao Lv】／188
13 The In.uence and Countermeasures of Newly Changed International Investment Rules
on Chinese Enterprise Globalization【Lu Jinyong, Wang Guang and Guo Lingwei】／191
14 The Risks and Precautions of Chinese Enterprises Globalization
【Wang Huiyao, Sun Yuhong and Miao Lv】／202
15 The Exploration and Analysis of Geopolitical Risks of The Belt and Road Initiative
【Wang Huiyao, Miao Lv and Duan Yuzhou】／224
Ⅵ Enterprise Reports
16 Fuyao Group: A New Model of Chinese Enterprises Investing in U.S.
【Sun Yuhong, Miao Lv】／234
17 Research on HNA Group’s Global Expansion to be a World-class Enterprise
18 Positec Group’s Experience on Building the Core Competitiveness for Its International Brand
19 Henry Global Consulting Group’s Practice on Serving Chinese Enterprises “Going Global”
20 Research on the “Going Global” of Wanda Group
【Zhang Shiwei, Cheng Yanjuan and Zhu Xuejing】／263
21 “Going Global” Strategy, Tactics and Practice: A Case Study on Chem China
22 “Going Global” Experience of New Hope Group【Chen Hui】／278
23 Collection of Key Events of China Outbound Investment ( July, 2014-June, 2015) ／283
24 Postscript ／353