Xia Le: Business Leaders Raise Their Game

2017-04-21 IMI

This article appeared in China Daily Asia on April 17, 2017. Xia Le, Senior Research Fellow of IMI, Chief Economist for Asia, BBVA Through public appearances and meetings with foreign leaders, Chinese entrepreneurs are becoming key players in globalization The younger generation of Chinese entrepreneurs have long abandoned the traditional tenet of steering clear of public attention, as once rang true for the first generation of Chinese business pioneers during the era of China’s reform and opening-up. Nowadays, Chinese entrepreneurs artfully use every opportunity to appear in public to promote their companies and products. Bucking the trend further, some Chinese entrepreneurs have become active in the global arena. Their names are frequently in the new media, with reports of their face-to-face meetings with the leaders and politicians of foreign countries. A recent case in point is the one-on-one meeting at the start of this year between Jack Ma, the founder of Chinese e-commerce giant Alibaba, and Donald Trump, then president-elect of the United States. Their meeting reportedly centered on Alibaba’s plan to expand its business in the US and was described on both sides as positive. To a large extent, these meetings with foreign government leaders reflect the good reputation and fast-rising popularity of Chinese magnates globally. With China’s stellar growth and integration into the global value chain, a large number of excellent companies have emerged in recent decades, as have their business leaders. In 2016, more than 100 Chinese companies were included in the Global Fortune 500 list, putting China second only to the US. It is no exaggeration to say that Chinese entrepreneurs, as a whole, constitute a new pillar of the international business community. More importantly, the “size effect” of the Chinese economy is not the only reason for the success of Chinese enterprises. Indeed, some excellent Chinese companies have already become the new global leaders in their industries. Nowadays, no one can challenge the leading position of Alibaba in the global e-commerce arena as its business model is highly admired and imitated in other countries. And for gigantic IT manufacturers such as Lenovo and Huawei, revenues from overseas markets have significantly exceeded revenues obtained domestically. Perhaps the most successful case of Chinese overseas investment is carmaker Geely’s acquisition in 2010 of the then struggling Volvo. In the years since, the Chinese company has made the Swedish automaker profitable again, thanks in large part to its successful strategy of targeting new car models in overseas markets. According to reports, Volvo has regained so much financial strength that a listing is being considered. Apart from the rising influence of Chinese companies, foreign leaders’ interest in Chinese entrepreneurs is likely to be motivated by the prospect of investment from China. As most countries continue to suffer tepid growth in the aftermath of the 2008-09 global financial crisis, their government heads have tried arduously to woo foreign investors in a bid to boost local economies. Meanwhile, China’s growth model is in transition from investment-driven to productivity-driven, making it imperative that Chinese enterprises implement their go-global strategies, climb the global value chain and expand their overseas markets — and there is no doubt that this trend will continue. The go-global strategy of Chinese enterprises has already seen the country become an international creditor since 2015, with China’s outbound direct investment exceeding inbound foreign direct investment for the first time that year. China’s authorities have also rolled out the visionary Belt and Road Initiative — the drive to improve connectivity along the historical Silk Road trading routes — facilitating the investment abroad of domestic companies. Foreign government heads cannot afford to ignore these potential whale investors with deep pockets. Meeting with Chinese entrepreneurs will enable these leaders to better attract investment from China and create more jobs. From the perspective of Chinese businesspeople, these meetings with foreign leaders are much more than mere symbolism. First of all, the implementation of go-global strategies also carries certain risks. These Chinese enterprises have to deal with foreign governments and their public. Their operations abroad become vulnerable to the political risk of the host country, as well as international geopolitical risks. In view of this, there is no better way for foreign investors to learn the political trend in the host country than by speaking directly with government heads. Such meetings can substantially help entrepreneurs craft their long-term strategies for overseas investment. Second, these meetings sometimes provide a good opportunity for the investors involved to negotiate more favorable terms. Last but not least, the local news media’s coverage of these meetings provides an opportunity for entrepreneurs to introduce their brands and products to the public of the host country. Looking ahead, people can expect more meetings between Chinese entrepreneurs and foreign government heads. They will become indispensable members of a deepening globalization.

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Xia Le: Business Leaders Raise Their Game

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