China Goes Global

Chinese business enterprises are going global. By doing so, they are reinventing China economically once again, transforming the country from being merely a platform for exporting low-grade manufactured goods such as textiles and apparel into a major force for overseas investment. The rise of China, along with its emerging economy counterparts Brazil and India as major sources of overseas investment, is arguably the biggest unfolding business story today. According to Goldman Sachs, these three emerging giants will account for half of all global business activity by 2050.¹

Economic globalization is the inevitable outgrowth of the socialization of production. This process has gone through three big stages since the Age of Discovery in the late 15th century. The first stage was the era of mercantile capitalism preceding the Industrial Revolution. The second phase of globalization occurred during the Industrial Revolution, when a vertical worldwide division of labor took form. In the third phase of globalization, which is unfolding in the present-day world economy, the earlier vertical international division of labor has given way to a horizontal division of labor. One salient feature of this third stage is the globalization of capital. Foreign Direct Investment (FDI) is one of the main forms of this phenomenon.

In the wake of the 2008–2009 financial crisis rising uncertainty in the world economy created opportunities and challenges for Chinese companies going global. Studying their efforts has both theoretical and practical significance. By undertaking a number of detailed analyses of long-term individual cases of Chinese enterprise globalization, this chapter summarizes and puts forward ten strategies these firms have used in expanding outward. As such, it serves as an important guide for these companies in their efforts to effectively invest overseas.

With the increasing globalization of economic and business affairs, expanding outward has become less a choice and more a necessity for large numbers of businesses. The growth of worldwide economic interdependence and rising importance of international markets means that such companies must go global in order to ensure their sustainable development. In the case of China, the globalization of its business enterprises further accelerated after the country joined the World Trade Organization (WTO), which led a growing number of companies to target different industries and follow various models while conducting overseas direct investment (ODI). But despite this substantial progress, Chinese firms still face many problems in their quest to go global, and lag well behind firms from advanced economies in this area.

The previous chapter set forth a rigorous set of selection criteria for determining the leading globalizing Chinese firms. This chapter presents lists of these companies, dividing them into two “top 50” sets of enterprises. The first set consists of firms who have already been going global for some time, while the second comprises the top 50 newly globalizing companies. In addition to these two lists, the chapter presents three other “top” lists. These are the top 10 globalization performers and the top 10 transnational M&A undertaken by Chinese firms as well as the 50 overseas listed Chinese enterprises. The first part of this chapter is accordingly divided into five parts, each part dealing with one of these top 50 or top 10 lists. The second part of the chapter then presents capsule case studies of the key event in the international expansion efforts of the of the up-and-coming globalizing firms ranking in the last “top 50” list of firms.

China’s entrance into the WTO in 2001 and the increasingly fierce competition on its domestic market among companies has made going global an increasingly attractive strategy for many Chinese companies. By doing so, they can make full use of the resources available on the world economy to better tap into external markets. In 2000, the Chinese Government first framed the Going Global Strategy for firms in China, making the outward expansion of business enterprises a major strategic initiative for the future economic development of the country. In the following decade and a half, Chinese companies have taken huge strides in doing outbound investment. In 2014, Chinese outbound investment totaled $116 billion, up by 15.5% over the previous year. According to the Ministry of Commerce, factoring in the investment made by Chinese firms through third parties raises the figure for Chinese overseas direct investment (ODI) to $140 billion. This extraordinarily rapid growth in investment outflows has made China one of the three biggest countries in the world for ODI and, for the first time in its history, a net outbound foreign investor.¹

The globalization of Chinese business enterprises has now entered a new stage. In 2013, the amount invested directly overseas by China broke through the $100 billion mark. And as was noted in Chapter 1, Chinese outbound direct investment (ODI) is set in 2015 to bypass inflows of foreign direct investment into the country for the first time in the history of China. Moreover, this development is surely no blip on the screen — the globalization of Chinese business enterprises will certainly accelerate, especially against the backdrop of Chinese Government policy initiatives such as the “One Belt, One Road” strategy. These measures and the rising globalization of economic relations will give Chinese companies ever greater incentives to go global and make developing the international market the “new normal” for China’s economy.

As China makes the transition from being a recipient to a source of foreign direct investment, its role in global economic governance will inevitably grow. The current Chinese leaders are quite aware of this coming sea change and are putting forward measures aimed at increasing China’s leadership role in the world economy, including in overseas investment. Thus, in September-October 2013, during visits to Central and Southeast Asia, President Xi Jinping proposed building a new maritime and overland “silk road.” That scheme, the so-called “One Belt, One Road,” initiative — the belt referring to the maritime “silk road” and the road being its overland component — aims to revitalize the premodern Eurasian trade routes that linked China to Europe. Under this new grand design, One Belt, One Road will connect China more closely not just to Europe, but Southeast Asia, Central Asia, the Middle East, and eastern Africa as well.