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When Chinese Businessmen Step Onto The Global Market

Back in business
Back in business
Li Junjie

Over the past 30 years, while China opened up to the outside world, the Chinese business community has gradually accumulated more and more knowledge of the world as well. Access to the World Trade Organization and modern information technology also helped speed along that process of global understanding.

Still, there are limits. Since the vast majority of China's business leaders grew up in a relatively closed environment and formed their business philosophy mainly in the Chinese market, there is a steep learning curve when it comes down to knowing how to invest, undertake mergers and acquisitions in the international market, or how to manage a multinational company.

Fortunately, the biggest advantage for Chinese entrepreneurs is precisely their ability to learn quickly.

Many of the most successful businessmen in China have risen to great heights from a humble background, which fosters optimism, a bold vision and courage. The very variable Chinese market requires a keen ability to capture opportunity, and the flexibility to make smart decisions quickly.

The downside to this is that Chinese companies too often have a lack of accurate data to make detailed plans and feasibility analysis. Fast decision-making to a large degree depends on intuitive judgment, which often means that Chinese entrepreneurs rely too much on pure opportunism and instinct. So when it comes to working internationally, the stakes are multiplied, and businesses making huge overseas investments can sometimes incur massive losses.

Gaming the system

There is another, sometimes contradictory characteristic to Chinese business: the huge role the government plays in the economy. This requires business leaders' ability to game the system, exerting one's political influence, and manipulating one's personal network.

In China, investment in powerful relations often brings the most lucrative return — more than investment in innovation. As a result, Chinese entrepreneurs tend to have more awe for the politically powerful rather than the market and customers. This inevitably becomes an obstacle to effective international operation and management.

Laws and ladders

Another feature of the Chinese market is its relatively inefficient legal system. The ambiguousness of regulations feeds the tendency to try to game the system, whether it be about taxes, environment or labor, rather than pay the rightful costs.

Compared with a mature market, Chinese entrepreneurs tend to have a more traditional social approach to building companies. From searching for business opportunities to risk management, they all rely more on guanxi, their relationship and political network, than the market and fixed regulations.

The influence of Chinese government's intervention on the market is also shown in the way enterprises pursue scale. The state authority encourages business to grow bigger and provides them with tangible as well as intangible support. Naturally this gives businesses the impulse to expand. In the domestic market, most investments and mergers are led by the government aiming at industry consolidation, scale expansion, and rescuing loss-making enterprises. Investors' direct commercial return is rarely the sole or the most important factor pushing a sale or merger. This of course does not play out the same way in overseas investment and mergers and acquisitions.

Chinese businesses, moreover, still give inadequate weight to shareholders' interests and returns. China has a very short and thin history of modern company governance, and the constraints on companies' management are still insufficient. In the Chinese stock market, misappropriation and disregard for shareholders' interests are not uncommon. All these issues are also likely to be reflected in Chinese companies' international mergers and acquisitions.

Chinese entrepreneurs have embarked onto the global playing field, imprinted with the various characteristics of the Chinese market and institutions. To study Chinese business' cross-border mergers and acquisitions, one has to look at Chinese businessmen with a thorough understanding of their background and constraints, their strengths and weaknesses, their common goals and challenges – and help them to overcome any historical or cultural disadvantages.

Business is the core of economic activity. Corporate behavior also reflects the economic environment and institutional features. Study of Chinese enterprises' cross-border mergers and acquisition, as well as the corporate behavioral and cultural contrasts and clashes between Chinese and foreigners provide us with a mirror and help us understand China more deeply.

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FOCUS: Russia-Ukraine War

Finally Time For Negotiations? Russia And Ukraine Have The Exact Same Answer

The war in Ukraine appears to have reached a stalemate, with neither side able to make significant progress on the battlefield. A number of Western experts and politicians are now pushing for negotiations. But the irreconcilable positions of both the Russian and Ukrainian sides make such negotiations tricky, if not impossible.

photo of : Ukrainian President Volodymyr Zelensky, left, presents a battle flag to a soldier as he kisses it

Ukrainian President Volodymyr Zelensky presents a battle flag to a soldier at the Kyiv Fortress, October 1, 2023.

Ukraine Presidency/Ukrainian Pre/Planet Pix via ZUMA
Yuri Fedorov

-Analysis-

The Russian-Ukrainian war appears to have reached a strategic impasse — a veritable stalemate. Neither side is in a position at this point to achieve a fundamental change on the ground in their favor. Inevitably, this has triggered no shortage of analysts and politicians saying it's time for negotiations.

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These conversations especially intensified after the results of the summer-autumn counteroffensive were analyzed by the Commander-in-Chief of the Armed Forces of Ukraine, Valerii Zaluzhny, with not very optimistic details.

Though there are advances of the Ukrainian army, it is mostly “stuck in minefields under attacks from Russian artillery and drones,” and there is a increasing prospect of trench warfare that “could drag on for years and exhaust the Ukrainian state.”

Zaluzhny concluded: “Russia should not be underestimated. It suffered heavy losses and used up a lot of ammunition, but it will have an advantage in weapons, equipment, missiles and ammunition for a long time," he said. "Our NATO partners are also dramatically increasing their production capacity, but this requires at least a year, and in some cases, such as aircraft and control systems, two years.”

For the Ukrainian army to truly succeed, it needs air superiority, highly effective electronic and counter-battery warfare, new technologies for mining and crossing minefields, and the ability to mobilize and train more reserves.

China and most countries of the so-called global South have expressed their support for negotiations between Russia and Ukraine. Meanwhile in the West, certain influential voices are pushing for negotiations, guided by a purely pragmatic principle that if military victory is impossible, it is necessary to move on to diplomacy.

The position of the allies is crucial: Ukraine’s ability to fight a long war of attrition and eventually change the situation at the front in its favor depends on the military, economic and political support of the West. And this support, at least on the scale necessary for victory, is not guaranteed.

Still, the question of negotiations is no less complicated, as the positions of Russia and Ukraine today are so irreconcilable that it is difficult to imagine productive negotiations.

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