Chinese Multinationals Look to Invest in "Local Ecosystems"
Five Chinese business leaders were presented with the IESE International Friendship Award at the Barcelona campus this week. The award recognizes significant contribution to global business, through investment and job creation in China and overseas.
A capacity audience at the IESE auditorium saw the prizes go to Yang Lan, co-founder of the Sun Media group; Shi Lirong, CEO and chairman of ZTE; Jiren Liu, CEO and chairman of Neusoft; Cai Mingpo, president of Cathay Capital, and Qiangdong Liu, founder and CEO of JD.com.
The IESE Friendship Award mirrors the Chinese Friendship Award which is made annually to foreign experts who have made significant contributions to China’s economic and social progress. Presiding over an international jury which made the selection was Professor Pedro Nueno, emeritus professor of entrepreneurship at IESE, and chairman of the Academic Council of the China Europe International Business School. Prof. Nueno was himself a recipient of the Chinese award in September 2014.
IESE Dean, Jordi Canals, opened the event with a welcome speech that highlighted the importance of friendship for European and Chinese cultures alike. Future economic and social prosperity, he said, hinges on cooperation, building bridges, and establishing a "web of friendships."
The awards were presented by Catalan Minister for Economy and Knowledge, Andreu Mas-Colell, who underscored the outstanding contribution made by each recipient to global business.
Receiving her prize, Yang Lan joked that a Chinese construction team should be put to work on the famously unfinished Sagrada Família to ensure its rapid completion.
Creating a Global Village
Prof. Nueno opened a lively debate by asking if we are likely to see Chinese businesses go global on a massive scale in the next few years. The panel agreed that while China’s high growth potential over the next decade is clear, sustainable international expansion is contingent on finding synergies and building solid partnerships with local entities.
Many opportunities remain untapped, however global growth will depend on local "friendships" said Cai Mingpo, founder and president of equity investment fund Cathay Capital, which recently opened offices in New York.
As more Chinese companies expand overseas, he said, there is a growing need for a "new approach;" with businesses participating proactively in "local ecosystems." Chinese multinationals have to invest not in countries, he stressed, but in local markets.
His words were echoed by ZTE CEO, Shi Lirong, who argued the case for "gloco." Chinese multinationals and their partners need to build a "global village," he said, one that is driven by friendship and cooperation.
The Benefits of Partnerships
Yang Lan pointed to the successive waves of international investment that have been made in recent years by Chinese companies in search of manpower and resources. Businesses are increasingly going overseas, she said, to source labor, tech support and, most recently, equity opportunities.
Global expansion is also delivering palpable benefits to business back home. Shri Lirong pointed to the example of numerous Chinese companies which are acquiring businesses in Europe and around the world, and leveraging overseas skills and technology to improve operations in the parent company in China.
Local partnerships are fundamental to driving growth overseas, the panelists agreed, from overcoming the challenges of regional bureaucracy, to capturing new market share.
Yang Lan gave the example of the entertainment industry in China, which is experiencing a growth in demand that could be the pre-cursor to a boom. China has the potential to become one of the world’s foremost producers of box office hits, she said. To this end, Sun Media is already pursuing a number of joint ventures with Hollywood.
Where will China be in 2020?
Looking to the future, Neusoft’s Jiren Liu is optimistic that positive change is taking root in Chinese society. There are major challenges such as pollution and privacy that still need to be overcome, he said, but the country has seen dramatic changes for the better over the last 30 years.
"People are happier and increased wealth is continuing to drive the economy despite the downturn in global demand." China’s new economy will be driven by an ambitious and highly educated young generation, he added.
Yang Lan agrees that positive change is taking place. China’s rapid urbanization will continue to fuel economic growth, and the proliferation of private foundations and NGOs augurs well for the future of China’s civil society.
The importance of lifestyle aspirations among urban and rural communities has created an appetite for change that cannot be underestimated, says Lan. "The Internet is a great liberator and equalizer, giving voice to our young people."