Ten years ago, the Government of China launched its “Going Out” strategy, a program to encourage Chinese companies to go global. At the time, Chinese outbound investment was $1 billion. In 2010, it was $70 billion, an increase of 700%. By the standards of most countries, that an amazing accomplishment. By the standards China has set in the last 30 years, it’s pretty routine. What is remarkable and bears watching, is the fact that $70 billion represents a tiny fraction of the more that $1 trillion in total global outbound direct investment. In other words, China is only just beginning.
My Panel at the 4th Bridges Conference in Geneva
With these statistics in mind, I attended The Fourth Annual Bridges China Dialogue, a meeting in Geneva, Switzerland dedicated to examining and promoting Chinese investment globally, with a special focus on Europe. Attendees included representatives from business, government, NGOs and academia. The senior most speaker was Jian Chen, Vice Minister, Ministry of Commerce, China. The Ministry of Commerce, also known as MOFCOM, is the most powerful economic ministry in China. Minister Chen discussed China’s 12th 5 year plan, which was announced earlier this year. Unlike in the U.S., when China announces its plans for the future, it is wise to pay attention. One analysis found that China typically achieves 80% of the goals it sets out in its five year plans. As noted above, when China decided to “Go Global,” it did it and continues to do so.
While participants addressed a multiplicity of topics, what struck me was the thematic differences between the Chinese speakers and the “western” speakers. For the most part, the Chinese speakers provided statistics that demonstrated China’s growth in outbound investment. They also expressed some frustration with some of the challenges they have faced in global markets.
The western speakers focused on giving strong advice to Chinese companies on global business norms. Underlying their comments was the guidance that Chinese companies need to recognize fundamentally the obligations they have to stakeholders beyond their specific business interests. My own presentation struck that theme, as well. Sometimes, it seems that Chinese companies have learned capitalism too well in that they believe that their only obligation is to make money, so customers and investors represent their only relevant audiences. Recognizing their broader social obligations seems foreign to them.
Of course, assuming broader social obligations is a relatively new phenomenon even for western companies. Corporate Social Responsibility was unheard of in the 1950′s and 1960′s. But it is a fundamental function of companies today, particularly global companies. So, it is understandable that the concept may not have caught up with Chinese companies. But they do bear the added burden of the ambivalence with which the developed world watches China’s explosive economic growth over the last 30 years. As a result, the “tone deafness” that Chinese companies sometimes exhibit in how they communicate beyond their core audiences of customers and investors generates added obstacles to their global growth.
My message to the group was that attention to the concerns of these broader audiences must be genuine and companies should address those concerns operationally. But it is equally important that companies communicate openly to governments, NGO’s and other stakeholders in order to expand their freedom to operate in foreign markets. Chinese companies confront many stereotypes when they enter markets in the more developed economies. Some of these stereotypes are irrational, but some are well-founded. It is critical that they address both the rational and the irrational fears that their potential stakeholders hold in these foreign markets. While my presentation was limited in time, the advice I provided can be found in a brochure developed as part of an initiative launched by my firm, Fleishman Hillard. The initiative is the Fleishman Hillard Global China Practice. The brochure is entitled The Eight Rules of Engagement for Chinese companies investing abroad.