In the past, enterprises primarily relied on export trade, with China becoming the world’s largest exporter and the biggest trading partner for over 120 countries. However, under the current circumstances, outbound investment is gradually replacing exports as the main avenue for corporate internationalization. Additionally, China’s international trade partners are changing. Previously, China relied heavily on economic cooperation with the United States, at one point becoming each other’s largest trading partner.
Recently, the Academic Research Platform of the “China-U.S. Friendly Mutual Trust Cooperation Program” at Fudan University held a symposium focusing on the theme “Dynamics, Adaptation, and Constraints: Opportunities and Challenges for Chinese Digital Platforms in Overseas Development.” During the discussion, Professor Luo Changyuan pointed out that the profound changes in domestic and international environments pose new challenges for Chinese companies venturing abroad. In response to this situation and to achieve sustainable development, Chinese companies need to adapt their outbound strategies and pathways accordingly.
Key Points from Luo Changyuan’s Remarks:
- Changing Domestic Environment:
- The microeconomic foundation of China’s economy is evolving, with private enterprises gradually replacing foreign-funded companies as the backbone of China’s economic development and internationalization. For instance, according to EU statistics from 2022, Huawei, Alibaba, and Tencent rank among the top 50 global companies in R&D spending, showcasing the strength of Chinese private enterprises.
- Moreover, China’s industrial ecosystem is undergoing transformation. For years, Chinese companies have competed with foreign counterparts in traditional sectors, but significant gaps remain, necessitating the exploration of new fields. China’s rapid development in the new energy vehicle sector is breaking traditional automotive industry patterns, indicating that emerging industries are becoming a foundation for China’s global competitiveness.
- Changing International Pathways:
- Previously, enterprises relied on export trade; now, outbound investment is becoming the primary means of internationalization. China’s international trade partners are also shifting. Following the pandemic, the importance of markets like ASEAN has significantly increased, making them China’s largest trading partners. Overall, China needs to pay more attention to economic relations with neighboring countries to avoid unnecessary friction.
- Utilizing “Latecomer Advantage”:
- Chinese companies should leverage their “latecomer advantage” to enhance market adaptability. Chinese firms are primarily focusing their overseas efforts on developing countries, which differs from the pathways taken by developed nations. Research indicates that Chinese companies have accumulated extensive experience in navigating incomplete markets domestically, making them more adept at addressing challenges in similar environments abroad.
- Harnessing “Ownership Advantage” through Supply Chains:
- Recent studies show that companies with robust domestic supply chains are more likely to enter overseas markets if their supply chain partners do so first. The “Ownership Advantage” theory underscores the importance of supply chain networks as competitive advantages. China, with its comprehensive industrial categories and tight supply chains, can leverage this advantage for outbound investments.
- Flexibly Applying Joint Ventures and “Technology for Market” Strategies:
- Chinese companies should flexibly adopt joint ventures and “technology for market” strategies when going abroad. Historically, China attracted foreign investment by exchanging market access for technology. Similar restrictions may be imposed by host countries during Chinese companies’ overseas investments, necessitating a flexible approach regarding joint ventures and technology transfer.
- Focusing on Neighboring Markets:
- As China’s economic rise continues, neighboring countries increasingly rely on China economically. While Chinese digital platform companies like Temu and Shein have established a global presence, the Asian market still requires focused development. Trends suggest that U.S. and European companies that withdrew investments from China have not returned to their homelands but have instead moved to neighboring Asian countries, indicating a preference for proximity to China’s supply chains.
- Continuing Institutional Opening:
- The barriers faced by Chinese companies in host countries stem fundamentally from institutional differences between China and those countries. Thus, China should enhance bilateral and regional arrangements at the institutional level. This includes seeking to join agreements like the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and ensuring that new bilateral free trade agreements address urgent institutional concerns.
In conclusion, as Chinese companies embark on their international journeys, adapting to changing environments and flexibly employing various strategies will be crucial for their success and sustainable development.