Firms warned against reckless foreign expansion

Alistair Michie, government adviser

Editor's Note

Chinese companies looking to expand overseas must temper their enthusiasm for new customers with realism and research, according to a longtime government adviser and senior analyst.

Alistair Michie works for strategic consultancy NICG and has previously advised the China State Administration for Foreign Experts Affairs.

He said Chinese firms were often portrayed in foreign media as on a mission to "buy up the world", but this was not true or even feasible.

Chinese media was often guilty of simply parroting this line and celebrating it as a triumph, which does no favors for the country's businesses as they look to build their global role and image, according to Michie.

"It creates a false impression," he said. "Chinese money, in terms of the country's GDP or its government reserves, is only a tiny portion of the wealth in North America and Europe. China simply cannot buy up the world."

Companies must be humble, ready to learn and quick to adapt to local realities, he said - yet few that he knew of had adopted this approach.

China's growing economic ties with the world are a natural offshoot of its reform and development over the past 30 years, said Michie. Some mergers and acquisitions are perceived or presented as having political significance when in actuality they are nothing more than business deals, he said.

The idea that China is buying up the world "is not real" and by the same token, owning a factory in a foreign land can only be the beginning for Chinese firms looking to do business in an international environment.

There is still much to be learned about the local market and laws, culture and people, Michie said.

China will have to employ a lot of people with international experience to lead it Belt and Road Initiative at an operational level, so the next few years should not be just about China raising its international profile but also about it learning from others, he said.

Of all the Chinese companies with a global reach, Michie singled out Huawei, the telecommunication equipment and services giant, as one of the rare exceptions that had made "a painful effort" to integrate local knowledge wherever its business reaches.

Many other companies, despite their expansion abroad, had yet to focus on learning English or their host countries' languages, and had not built trust with the local elites. Thus, their chances of growing into true multinational corporations was still in question, Michie said.

suzhou@chinadaily.com.cn