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Opinion / Zhang Yu'an

Transformation and upgrading more important than going global in haste

By Zhang YuAn (chinadaily.com.cn) Updated: 2015-04-03 14:39

Transformation and upgrading more important than going global in haste

Visitors look at refrigerators at the stand of Haier during the 2015 Appliance and Electronics World Expo in Shanghai, China, March 13, 2015. [Photo / IC]

Going global has been a buzzword for a while across China and it seems a growing number of Chinese enterprises are excited about it and want to follow in the footsteps of foreign counterparts to have succeeded in doing so.

But a Chinese entrepreneur from a State-owned company headquartered in Zhuhai city, Guangdong province, has said transformation and upgrading are more important than going global.

After more than three decades of opening and reform a number of Chinese enterprises, both State-owned and private, have tested the water of the international market by building manufacturing facilities abroad through investment or acquired foreign companies. Some are successful, such as Haier, Lenovo and Geely.

But there are also a large number that are not so successful or have even been losing money for years. Some regard losing money as paying fees for learning new things. But it seems that they, especially those spending public money, are addicted to such learning and their learning curve is too long, and not steep, if the word “flat” is inappropriate.

Before going global, entrepreneurs should be aware of the competitive advantages of doing so.

Competitive factors for enterprises may include good brand recognition, key technology know-how and quality products, as well as sound cash flow and market share.

But in a foreign market there are more factors to consider such as foreign legal systems, market conditions, labor unions and even environmental protection and social responsibility requirements.

Chinese President Xi Jinping quoted an old Chinese saying that goes: “to forge iron, one himself must be strong”. In foreign terms, don’t run before you can walk.

Transformation and upgrading more important than going global in haste

A woman is seen at a store of Lenovo in Shanghai, China, Feb 26, 2013. [Photo/IC]

Enterprises planning to go global may first need to have a solid base and core competitive edge in their home market.

Manufacturing in China has encountered many difficulties in recent years due to the increased costs of labor and materials, bank loans, fiercer competition and over-capacity.

But these factors cannot be reasons for enterprises to move production abroad in haste before they have developed core technology know-how, leading edge products and a team of management professionals who know foreign market and their rules.

Known as the factory of China, Guangdong is the largest industrial manufacturing base in the country, with products ranging from ocean-going ships, advanced shield tunneling machines, automobiles, telecommunication equipment, drones, television sets and air conditioners to small items like Christmas trees, toys, shoes and countless household goods.

When finding the market a challenge they would be better off investing more on transforming and upgrading products and technology to foster technical know-how and sharpen competitive edge. Also, investment contributes to the local economy and employment which is needed domestically. With advanced technology and cost-effective, good quality products, Chinese enterprises can compete more favorably in the international market.

Before going global it is advisable to go local first, which means having a global view and thinking while focusing more on local manufacturing upgrading and innovation, just like the country’s high-speed railway manufacturing companies are doing.

It is time for Chinese entrepreneurs to work hard to build “Made-in-China” into a well-recognized brand in the world.

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