A Few Simple Tips For Chinese Companies With Global Ambitions

Chinese multinationals are growing faster than their competitors anywhere else in the world, but they still have a long road ahead until they can become truly global.

China's business capital (Mike Behnken)
China's business capital (Mike Behnken)
Wang Chiyue*

SHANGHAI - Ten years after joining the World Trade Organization, foreign investments by Chinese firms total $312.4 billion, with an annual average increase of $60 billion over the past four years. This has made China's multinationals the world's fastest-growing.

However, the Chinese multinationals still have a long, hard road ahead before they can transform themselves from "transnational" to truly "global" and the lasting success that comes with it. The challenges they are facing are four-fold:

1. An investment strategy adapted to globalization
According to the World Investment Report 2012, the average Trans-Nationality Index (TNI - an economic measure of how much of the business is done outside the home country) for the top 100 trans-national corporations (TNCs) in the non-financial category is around 60%. Nine Chinese TNCs made their way onto the list, but their average TNI is only 24.5%. This means, in comparison with advanced countries' global giants, Chinese companies' ratios of their foreign assets, foreign sales, as well as foreign employment are still very low. This is basically because they lack the ability to adopt a clear and long-term global operating strategy.

2. Adapting the management structure for a global operation
Since the 1990s, the ownership structure of multinationals around the world has changed. While their overseas shareholders have gradually increased, their international stakes rise continuously. In terms of corporate governance structure, many multinationals have established an international board of directors. As for management structure, many global companies have adopted an international network management. This sort of managing structure creates an effective balance between centralization, decentralization and coordination, so it can respond in a more timely manner to the changing market.

In China though, multinationals remain mostly in a centralized management mode.

3. Ethics
In this century, responsible business is very important. Apart from maximizing shareholder value, it's expected that transnational companies take some responsibility for the society and the environment they operate in, whatever the country.

Compliance and anti-corruption policies are fundamental. Business ethics are the primary responsibility of a business. Though many Chinese multinationals are taking their responsibilities seriously, many others indulge in fraud, bribery, corruption and are also lacking in safety and environmental issues.

4. High-risk areas
Many cases have shown that Chinese overseas investments can suffer from unexpected circumstances and that Chinese companies aren't prepared for these circumstances. In January, rebels in the Sudan kidnapped 29 Chinese employees. Four days later, another 25 employees were hijacked by armed tribes in Egypt.

Major projects have been forced to stop due to political conflicts. For instance the Myitsone Dam project in Myanmar was halted in September 2011 due to Myanmar's changing political situation.

High-risk areas are often underdeveloped and have rich natural resources. Chinese companies are usually too dependent on the support of the ruling authority while possessing insufficient understanding or paying little attention to local interest groups. This puts them and their workers subject to regional or political conflicts.

So what is the key to success? Through a series of interviews and surveys, we found that some Chinese firms had been quite successful in their foreign expansion. These are four lessons we can learn from them:

1. Controllable risks
High-risk areas are often the places where the best business opportunities lie, where local authorities often lack legitimacy and where corruption prevails and the nation is polarized.

It is therefore particularly important for firms interested in investing in potentially risky areas to undertake sufficient risk assessment. Not only is it necessary to understand and to be capable of dealing with the local authority, but also with the local non-governmental organizations, forces or even opposition.

If it's impossible to control and defuse the potential risks, the investment should be vetoed. But if the investment is green lighted, it is highly important to adhere to responsible guidelines. Bribery of the local authorities should be avoided and it is also vital to maintain good relations with local NGOs and powers.

A win-win attitude
Economic globalization in full swing means that international conditions for foreign investment have undergone fundamental changes. The era where established multinationals could plunder resources through force or unfair trade is long gone. In this new era, TNCs can succeed only if they follow responsible commercial behaviors and implement the win-win principle.

Nowadays, it would be difficult for a host country to accept a foreign investor who is only considering its own economic interests.

Developing new technology and products as well as building a global industrial supply chain has become increasingly important. Chinese multinationals need to enhance cooperation with each other as well as with foreign firms, whatever the sector.

Several successful examples in recent years, such as the joint venture between Shanghai Automotive and General Motors, as well the one between Chinalco and Anglo-Australian mining giant Rio Tinto, show that mutual cooperation can be a most effective strategy. Not only does the cooperation make up for China's lack of experience in international investments, it also defuses other countries' resistance to Chinese state-owned companies' investment.

Cultural integration
Chinese companies have to integrate into the world. How well a firm is integrated locally is the biggest challenge -- and biggest opportunity -- when going global.

In 2008, Zoomlion, the Chinese manufacturer of construction machinery and sanitation equipment acquired Italian machinery manufacturer CIFA. Last year, the Italian President awarded the Leonardo Award to Zoomlion in recognition of the company's contribution to Italy. The Italians realized that the Chinese were neither an "expeditionary force," nor there to build another Chinatown.

This example demonstrates that Chinese companies have to follow international rules, integrate with the local culture and become a localized business.

To this end, they have to be inclusive in respecting the local culture, to understand the local business language and bridge the cultural differences between East and West with an open mind.

International investment is not economic colonization. Only if the multinationals share a common vision and establish a common interest with the host countries, can they be integrated harmoniously and achieve true development.

*The author is the Director of Beijing New Century Academy on Transnational Corporations

Read the full article in Chinese in Caixin. The English version has been condensed and edited.

Photo - Mike Behnken

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How Thailand's Lèse-Majesté Law Is Used To Stifle All Protest

Once meant to protect the royal family, the century-old law has become a tool for the military-led government in Bangkok to stamp out all dissent. A new report outlines the abuses.

Pro-Democracy protest at The Criminal Court in Bangkok, Thailand

Laura Valentina Cortés Sierra

"We need to reform the institution of the monarchy in Thailand. It is the root of the problem." Those words, from Thai student activist Juthatip Sirikan, are a clear expression of the growing youth-led movement that is challenging the legitimacy of the government and demanding deep political changes in the Southeast Asian nation. Yet those very same words could also send Sirikan to jail.

Thailand's Criminal Code 'Lèse-Majesté' Article 112 imposes jail terms for defaming, insulting, or threatening the monarchy, with sentences of three to 15 years. This law has been present in Thai politics since 1908, though applied sparingly, only when direct verbal or written attacks against members of the royal family.

But after the May 2014 military coup d'état, Thailand experienced the first wave of lèse-majesté arrests, prosecutions, and detentions of at least 127 individuals arrested in a much wider interpretation of the law.

The recent report 'Second Wave: The Return of Lèse-Majesté in Thailand', documents how the Thai government has "used and abused Article 112 of the Criminal Code to target pro-democracy activists and protesters in relation to their online political expression and participation in peaceful pro-democracy demonstrations."

Criticism of any 'royal project'

The investigation shows 124 individuals, including at least eight minors, have been charged with lèse-majesté between November 2020 and August 2021. Nineteen of them served jail time. The new wave of charges is cited as a response to the rising pro-democracy protests across Thailand over the past year.

Juthatip Sirikan explains that the law is now being applied in such a broad way that people are not allowed to question government budgets and expenditure if they have any relationship with the royal family, which stifles criticism of the most basic government decision-making since there are an estimated 5,000 ongoing "royal" projects. "Article 112 of lèse-majesté could be the key (factor) in Thailand's political problems" the young activist argues.

In 2020 the Move Forward opposition party questioned royal spending paid by government departments, including nearly 3 billion baht (89,874,174 USD) from the Defense Ministry and Thai police for royal security, and 7 billion baht budgeted for royal development projects, as well as 38 planes and helicopters for the monarchy. Previously, on June 16, 2018, it was revealed that Thailand's Crown Property Bureau transferred its entire portfolio to the new King Maha Vajiralongkorn.

photo of graffiti of 112 crossed out on sidewalk

Protestors In Bangkok Call For Political Prisoner Release

Peerapon Boonyakiat/SOPA Images via ZUMA Wire

Freedom of speech at stake

"Article 112 shuts down all freedom of speech in this country", says Sirikan. "Even the political parties fear to touch the subject, so it blocks most things. This country cannot move anywhere if we still have this law."

The student activist herself was charged with lèse-majesté in September 2020, after simply citing a list of public documents that refer to royal family expenditure. Sirikan comes from a family that has faced the consequences of decades of political repression. Her grandfather, Tiang Sirikhan was a journalist and politician who openly protested against Thailand's involvement in World War II. He was accused of being a Communist and abducted in 1952. According to Sirikhan's family, he was killed by the state.

The new report was conducted by The International Federation for Human Rights (FIDH), Thai Lawyer for Human Rights (TLHR), and Internet Law Reform Dialogue (iLaw). It accuses Thai authorities of an increasingly broad interpretation of Article 112, to the point of "absurdity," including charges against people for criticizing the government's COVID-19 vaccine management, wearing crop tops, insulting the previous monarch, or quoting a United Nations statement about Article 112.

Juthatip Sirikan speaks in front of democracy monument.

Shift to social media

While in the past the Article was only used against people who spoke about the royals, it's now being used as an alibi for more general political repression — which has also spurred more open campaigning to abolish it. Sirikan recounts recent cases of police charging people for spreading paint near the picture of the king during a protest, or even just for having a picture of the king as phone wallpaper.

The more than a century-old law is now largely playing out online, where much of today's protest takes place in Thailand. Sirikan says people are willing to go further on social media to expose information such as how the king intervenes in politics and the monarchy's accumulation of wealth, information the mainstream media rarely reports on them.

Not surprisingly, however, social media is heavily monitored and the military is involved in Intelligence operations and cyber attacks against human rights defenders and critics of any kind. In October 2020, Twitter took down 926 accounts, linked to the army and the government, which promoted themselves and attacked political opposition, and this June, Google removed two Maps with pictures, names, and addresses, of more than 400 people who were accused of insulting the Thai monarchy. "They are trying to control the internet as well," Sirikan says. "They are trying to censor every content that they find a threat".

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