What do Chinese enterprises bring to the world?
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E-mail China Today, September 8, 2015
Localized management
"Philanthropy is not the only way to fulfil one's social responsibility. Localization is an alternative," Sun Ziyu, vice president of China Communications Construction Company Limited, believes. In the past, when venturing in emerging markets abroad, Chinese enterprises usually followed the modes they've adopted in China. However, they cannot go further in the investment destinations unless localized models are formed. In Latin America, for instance, public goods and infrastructure must fit the local demands. Meanwhile, cooperation with local enterprises and employing locals are encouraged. Localization is an important way to keep China's footing in the region.
When China's international contractors first entered the global market some 30 years ago, most of them did not have clear targets and depended on random opportunities. But today, the first step of a company going abroad is localization. Chinese entrepreneurs have realized that good localization is a premise of going global. Vice President of Beijing Construction Engineering Group Ma Tieshan pointed out: "Over the decades, production materials for projects abroad were always purchased from China. But this trend is decreasing." If some materials are not accessible in the regions where the projects are carried out, global procurement is encouraged. "Especially for building materials like doors and windows, we make the best use of local products. Cooperating with local companies guarantees their business in the local market."
This opinion is shared by Du Fei: "Whether in an investment project or a construction project, for every RMB 100 we invest abroad, 40 percent is spent on local procurement including the salary of local staff." Du was a project manager in Kenya several years ago. He said at that time, the number of Chinese staff was just ten percent of the whole team.
When talking about localization culture, Ding Zhengguo, head of the Overseas Business Unit of Power Construction Corporation of China, revealed: "We encourage our staff to see the investment destinations as their hometowns. Besides, they are advised to fully communicate with local governments so as to get a better understanding to the market." In Ding's company, localization development is embodied in the company's system and policies. Furthermore, the company's development strategy is closely combined with the infrastructure constructions and economic development plans in the investment destinations.
Ding believes that as business structure transforms, the dimensions of and perspectives on localization must accordingly also change. Entering a market in Africa, or anywhere else, is a strategic process. Instead of engineering contracting as in the past, Chinese companies now integrate fund financing and investing in various business models into their management.
Many Chinese entrepreneurs think even bigger. Wang Hongqian, general manager of China Nonferrous Metal Industry's Foreign Engineering and Construction Co., Ltd., raised the question, "Bridges and roads are built. But what do local workers do after the projects are finished and we have left? We must help those places to achieve sustainable development." China Nonferrous Metal Industry's Foreign Engineering and Construction Co., Ltd. is a listed company. Profits generated in the overseas market take up 60 to 70 percent of the company's revenue. Hence, the company strives to achieve mutual benefits and win-win results with its investment destinations. "We are working hard to practice Premier Li Keqiang's proposal of capacity cooperation by innovating conventional contracting modes. For instance, our mining projects now welcome investment in capital, products, exclusive sales, and subcontracting of product management. The subcontractors hire local workers, which will generate job opportunities in the same way as we do."
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