Bosses Sense Resistance Abroad

August 31st, 2011 | Economic Observer

As Chinese companies do more and more business outside their home market, their executives are sensing increased resistance and risks abroad.

With this in mind, the government organized a conference this August to counsel its businesses on “risk prevention and control overseas.”

“Local people will think you’re taking too large a share of their market, so they feel repulsion for us,” a person in charge from the State Power Grid said during the event.

He told the EO that some developed countries appear to welcome Chinese companies, for example by offering to take managers on investment tours, but sometimes politicize economic issues instead. Chinese investments are often subject to strict reviews in the name of national security, employment protection and industrial development, he added.

“Some western countries don’t want us to develop too quickly,” said an executive from China Metallurgy Technology Group Co., Ltd, explaining that “competition for projects is getting fiercer and we either lose the contracts or fail to profit from them.”

Developing countries, including China’s neighboring countries, are also putting up obstacles for Chinese companies that want to invest.

For example, Chinese workers on a five-year project are issued with three-month visas that need to be renewed continuously or foreign governments will seek to guarantee business for local firms by dictating where to buy raw material, or which distributors to use.

One solution, suggested by an executive from Sinopec Group, might be for Chinese businesses to coordinate their foreign investments.

Sinopec, he said, is investing in countries with inadequate infrastructure for agriculture, energy, power and transportation, but might have been able to win more favorable terms from their governments if it had formed a team with other Chinese businesses offering to upgrade infastructure.

Another problem has been direct threats.

“Chinese staff are more exposed to risks. In some high-risk countries, Chinese people have become the target of planned attacks,” said Zheng Chao, an official from the Ministry of Commerce.

That growing menace is clear from the statistics; Chinese businesses abroad experienced 65 “sudden security incidents” in the first half of 2011, up 45% from the same period last year.

The sudden regime change in Libya has also impressed upon Chinese companies the need to closely monitor political developments abroad.

“We knew the news a few days in advance, so we were prepared. We were well organized with food reserves, deep trenches and guards because we had precious ten days warning,” said an executive for China Communications Construction Group, which evacuated its Chinese employees from Libya.

The clearest sign that Chinese companies are aware of the risks was the guest list.

“Assembling all the chief executives is not an easy task,” said Zheng Chao, an official from the Ministry of Commerce, which organized the meeting along with the State-owned Assets Supervision and Administration Commission, the foreign, and state security ministries.

By Zhang Bin(张斌)

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Category: Africa, China Oil Monitor