Editor's note: An international symposium, focusing on the innovation, development and overseas expansion of Chinese companies, was held at the Tokyo Opera City Tower in Japan on Dec. 1, 2024. The event was organized by Cloud River Urban Research Institute and supported by China Internet Information Center. 

Key speakers included Zhou Qiren, professor at the National School of Development, Peking University; Xu Lin, chairman of the China-U.S. Green Fund; An Ting, chairman of Beijing Chic-PIA International Cultural Development Co., Ltd; and Lin Huichun, professor at the Belt and Road School of Beijing Normal University. They shared insights on the evolution and future of Chinese companies' overseas expansion.

Lin Huichun: Why overseas expansion matters for Chinese companies and society

First, I'm a practitioner of going global, a natural part of working in the software industry. Second, I'm a beneficiary of it. Going global has not only broadened my own horizons, but also helped my company expand internationally and grow its business. Third, I'm an advocate for global expansion. In today's globalized world, I believe international vision and operations are essential for businesses. That's why I founded the "CEO Global Classroom," taking Chinese entrepreneurs to over 50 countries and regions to help them gain broader perspectives and grow their overseas ventures.

Over the past four decades of reform and opening up, one of China's greatest achievements has been becoming the world leader in trade and manufacturing, a testament to how globalized the country has become. So why has going global become such a hot topic again in recent years? What does it really mean for businesses today? Where are the boundaries, and what does it mean for businesses, the industry, and society as a whole?

Zhou Qiren: Expanding overseas is far more challenging than shifting to exports

A 2019 comparison of the Fortune 500 companies from China and the U.S. revealed a stark contrast. Chinese companies derive less than 20% of their revenue from international markets, while U.S. companies generate over 60% of their earnings overseas.

Midea Group, based in Foshan, Guangdong province, is China's largest private manufacturing enterprise. When I visited Midea, they said that 41% of their total sales, approximately 130 billion yuan ($17.98 billion), came from overseas markets, with 18 international manufacturing bases generating 25 billion yuan in revenue in China and exporting products worldwide. So why did Midea decide to establish overseas manufacturing bases?

According to the company, this major shift was driven by a strategic transition from "China supplying the world" to "regional production for regional markets." As the company expanded and entered more distant markets, new constraints emerged, including rising transportation costs, tariffs, and increasing demand for localized production.

After Fang Hongbo took over Midea, he decided not to focus solely on production quantity but instead to prioritize product quality. He cut half of Midea's product lines, concentrating on high-value products. However, these premium products come with unique requirements—customers not only care about the product itself but, in some cases, also require factory inspections.

As a result, Midea began establishing production bases overseas, inviting local distributors and consumers to visit the facilities. This not only helped enhance consumer confidence in product quality but also contributed to building Midea's brand presence in international markets.

Midea's founder, He Xiangjian, recognized early on the importance of expanding beyond China. He once stated, "Rather than competing for market dominance domestically, we must venture abroad and establish ourselves internationally." As early as 2005, he sent a team to Vietnam for market research, and by 2006, Midea had invested in building a factory there. This move was not only driven by tariff considerations but also provided a gateway for Midea's products to enter the U.S. market.

China's economic opening followed a clear sequence: first attracting foreign investment ("bringing in"), then focusing on exports ("exporting"). However, once exports reach a certain level, challenges inevitably arise. So, how to meet with those challenges? In the past, once a product left China, it was no longer the manufacturer's concern — international intermediaries handled the rest. Now, businesses must not only manufacture but also invest and manage operations overseas. This shift is far more challenging than the transition from domestic sales to exports, especially when entering markets that lag behind China in infrastructure and economic development, posing even more complex challenges for both companies and business leaders.

An Ting: Cultural exchange is a two-way street

As someone deeply involved in the cultural industry, I believe that bringing global cultural influences into China and promoting Chinese culture abroad must go hand in hand. The government has emphasized the need to modernize China's cultural industry and market system, launching major cultural initiatives to strengthen China's global cultural presence.

In 2023, Beijing set a goal to establish itself as a "Capital of Performing Arts," an essential part of its strategy to enhance its role as a national cultural center. This initiative will significantly boost Beijing's international cultural influence.

According to China's National Bureau of Statistics, the value added by China's cultural industry grew from 1.8 trillion yuan in 2012 to 4.49 trillion yuan in 2020, with an annual growth rate of 12.1%, far exceeding overall GDP growth. The sector's contribution to GDP also increased from 3.36% to 4.43%. These figures highlight the rapid growth and vitality of the cultural industry, which is not only driving the development of related sectors but also emerging as a new engine of economic growth.

The cultural industry has made remarkable progress, particularly in global outreach, with its influence and communication capacity continuously expanding. From 2012 to 2022, the number of cultural enterprises in China grew from 36,000 to 65,000, while annual revenue more than doubled from 560 million yuan to 1,190 million yuan, demonstrating steady improvements in development quality.

As China actively advances the initiative to build its cultural power, major cultural industry projects are being implemented to drive innovation through both international exchange and global outreach. This approach will also contribute to building a community with a shared future through cultural exchange. I believe the performing arts sector should take the lead as a front-runner in this effort.

Xu Lin: Trend of Chinese companies going global is clear and irreversible

Having worked in government for many years, I want to discuss from a macroeconomic policy perspective why China has reached this stage. China has long pursued a comprehensive strategy of opening up, which means not only "bringing in" foreign investment but also "going global" to expand overseas with the goal of making better use of both domestic and international markets and resources. However, for a long time, our focus has still been on exports.

Since joining the World Trade Organization (WTO), China has made significant progress in exporting manufactured goods. When the 20th anniversary of China's WTO accession was commemorated, the Ministry of Commerce invited those of us who had participated in the negotiations to contribute to a retrospective report. Over the past 20 years, China's trade in goods surplus with the U.S. and the EU alone has reached $6 trillion. This number is likely even higher now, given that China's annual trade surplus with the U.S. has remained between US$400 billion and US$500 billion.

But this raises a critical question: Can the world continue to absorb such an imbalance?

During a visit to the Peterson Institute for International Economics in October, I spoke with a former South Korean Minister of Trade who made an important observation. He pointed out that if a smaller country followed China's current trade model, it might not be a problem. But China's sheer economic scale has reached a point where it is becoming unsustainable for the global system to handle. In other words, China must adjust its approach.

Some of the trade restrictions imposed on China in recent years stem directly from this massive trade surplus. The United States is the only country that can absorb such imbalances, largely because it can print dollars to offset its trade deficit. Other countries do not have this option, making China's current trade model increasingly difficult to sustain.

A specific example of this shift can be seen in Crystal Optoelectronics, a publicly listed company in Taizhou, Zhejiang, specializing in optical sensors, with 70% of its products sold to Apple. In recent years, Apple has required Crystal Optoelectronics to implement a "China+1" strategy — it must establish a production base outside of China.

Why did Apple demand this? As Professor Zhou Qiren mentioned earlier, this requirement is to address potential risks. While Apple relies heavily on Crystal Optoelectronics, it cannot allow any disruptions in China to threaten its supply chain stability. To mitigate this risk, Apple required the company to establish a production line in Vietnam. Although this decision was not voluntary for Crystal Optoelectronics, it ultimately provides the company with a backup plan in case of geopolitical or trade disruptions.

This kind of preventive, alternative overseas expansion is becoming increasingly common. It reflects the growing impact of geopolitical tensions—not just between China and the U.S., but between China and Western economies as a whole — on corporate decision-making.

From the perspective of business operations and services, like the consumer electronics sector, companies need to establish a presence overseas. It's no longer just about selling products; they also need to provide after-sales services and respond quickly to market demand. If all components and production are concentrated in China, it becomes increasingly difficult to meet overseas maintenance and support needs as exports grow. By setting up production bases abroad and building a local ecosystem for spare parts and support, companies can better adapt to these evolving requirements.

From the national strategy to industry needs and individual businesses, the necessity for Chinese companies to expand globally is clear and irreversible. Different companies and industries may have different motivations and priorities, but the overall trend is unmistakable, and there is no turning back.

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