China firms urged to go global

  • News
  • Monday, 18 Apr 2016

(from left) Xu Hongcai, director of economic research at China Center for International Economic Exchanges and said Wang Zhile, research fellow of Chinese Academy of International Trade & Economic Cooperation of the Ministry of Commerce

GO FORTH and prosper – that’s the salient message that has emerged from a forum in Shenzhen last month, which urged China’s companies to adopt a global market strategy.

Entitled “Implications of China’s Economic Restructuring from ‘Made in China’ to ‘Made by China’,” the forum brought together intellectuals who discussed what to expect in 2016, following a new initiative launched by Premier Li Keqiang.

The “Made in China 2025” initiative aims to transform China into an innovative global manufacturing power in the next decade.

The consensus that emerged from the forum was that while China was already the factory of the world, it needed to look beyond its borders to continue growing, including exporting its manufacturing capabilities.

Professor Dr Xu Hong Cai, director of China Centre of International Economic Exchanges’ Economic Research Department, said the Middle Kingdom was already the largest manufacturer in the world, having surpassed the US since 2010.

Its manufacturing sector is only going to get bigger since China plans to urbanise 300 million of its rural population by 2020.

“We are not like Russia and Germany, which halted when they reached 70% of the level of the US’ production capacity. China has surpassed all of them,” he said.

Based on data published by the United Nations, China’s global market share for manufacturing activity rose sharply from 18.9% in 2010 to 23% in 2013.

Contributing to the figures was the fact that out of some 360,000 companies in China, 90% are manufacturers, said Dr Xu.

A third of China’s 300 million-strong workforce were in manufacturing, he said, and another 300 million was set to join the manufacturing industry and the manufacturing-service sector in 2020.

However, this growth may not be sustainable, judging from the fact that 66% of the country’s economy is driven by internal consumption.

To maintain its GDP growth of 6.5%-7%, local companies need to set their sights across China’s borders.

Dr Xu urged Chinese corporations to export their manufacturing products abroad to help developing countries form a “complete industrial chain”, and not just build infrastructures.

“China has such capability; it will inject new energy into the global economy,” he said.

Agreeing with him was a research fellow in China’s Ministry of Commerce Professor Dr Wang Zhile, who said Chinese companies needed to adopt global market strategies as soon as possible.

One of those success stories so far is Huawei, the Chinese company specialising in telco equipment. Huawei has made its presence felt across the world and is a company that has achieved global brand recognition.

However, unlike Huawei, many Chinese companies were not equipped to take the leap abroad, said Dr Wang.

Citing a study comparing the 100 biggest transnational companies across the world, he said these companies’ average transnational index was 60%.

“However, in China, it’s only 13%,” he pointed out, adding that the study took into account a company’s adaptability to foreign regulations and cultures.

“We are talking about how competitive we are, but compared to others, we still have a long way to go,” he said.

Dr Wang also added that unlike many of these transnational behemoths, Chinese companies do not have the luxury of building up their names over a century.

He pointed out there were two shortcuts: one was to acquire foreign subsidiaries and the other to leverage on the Internet.

“Global corporations from abroad have brought energy to China’s economic growth and was a catalyst to the economic transformation. Such corporations from China, meanwhile, promote fusion of China’s economy into the world,” he said.

Dr Wang pointed out that both kinds of firms were becoming increasingly common, adding that the country’s Belt and Road initiative would help propel China into the next stage of development.

“We are honoured to be born in this age to witness this great undertaking in this lifetime,” he said.

The forum was organised by China Daily and co-organised by startup company IngDan.

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