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China spreads its wings Chinese companies go global
Introduction
Lenovo, Haier, TCL, Huawei, China National Offshore Oil
Corporation (CNOOC), Nanjing Automotive and, now, China
National Petroleum Corporation (CNPC). Not long ago, these names would have elicited blank looks from most global business executives outside China. Now, however, these companies are part of a trend that is sending shockwaves through the business world.
China has 16 companies in the Fortune Global 500 list, up from
11 in 2002 (see Figure 1). The value of overseas acquisitions completed by Chinese companies doubled in 2004, and 2005 has already seen a succession of highly ambitious bids. Chinese companies are looking to make a global impact and achieve high performance. The recent flurry of high-profile deals involving Chinese companies has been greeted with consternation by the rest of the world. Yet many observers argue that this corporate activity is simply the latest stage of China’s reintegration into the global economy.
The process began more than 20 years ago when the country threw open its doors to foreign businesses, and has accelerated quickly since China joined the World Trade Organization in 2001.
Between 2000 and 2004, China’s outward Foreign Direct Investment
(FDI) stock increased by more than 70 percent. In 2004, FDI outflows totalled
US$5.5 billion, an increase of 93 percent on 20031. The largest recipients were Asia (54.6 percent) and Latin
America (32 percent) (see Figure 3).
Now that every multinational has acknowledged the necessity of having a strategy for China, it should come as
no surprise that Chinese companies are busy crafting their own strategies for dealing with the outside world. Instead of focusing on the perceived threat of
Chinese entrants into their home markets, it is more productive for western companies to understand what is driving this phenomenon and capitalize on the opportunities that arise.
Introduction
Lenovo, Haier, TCL, Huawei, China National Offshore Oil
Corporation (CNOOC), Nanjing Automotive and, now, China
National Petroleum Corporation (CNPC). Not long ago, these names would have elicited blank looks from most global business executives outside China. Now, however, these companies are part of a trend that is sending shockwaves through the business world.
China has 16 companies in the Fortune Global 500 list, up from
11 in 2002 (see Figure 1). The value of overseas acquisitions completed by Chinese companies doubled in 2004, and 2005 has already seen a succession of highly ambitious bids. Chinese companies are looking to make a global impact and achieve high performance. The recent flurry of high-profile deals involving Chinese companies has been greeted with consternation by the rest of the world. Yet many observers argue that this corporate activity is simply the latest stage of China’s reintegration into the global economy.
The process began more than 20 years ago when the country threw open its doors to foreign businesses, and has accelerated quickly since China joined the World Trade Organization in 2001.
Between 2000 and 2004, China’s outward Foreign Direct Investment
(FDI) stock increased by more than 70 percent. In 2004, FDI outflows totalled
US$5.5 billion, an increase of 93 percent on 20031. The largest recipients were Asia (54.6 percent) and Latin
America (32 percent) (see Figure 3).
Now that every multinational has acknowledged the necessity of having a strategy for China, it should come as
no surprise that Chinese companies are busy crafting their own strategies for dealing with the outside world. Instead of focusing on the perceived threat of
Chinese entrants into their home markets, it is more productive for western companies to understand what is driving this phenomenon and capitalize on the opportunities that arise.
References: 3 Strategy + Business, Profits and Perils in China, Inc., Strategy + competition, first quarter, 2002 (issue 26)