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Prof. Zhou Qiren: Seeking Linkage in Global Network

Dec 15-2023   



In a recent summit by Caixin, a leading business media group, Prof. Zhou Qiren of the NSD delivered a speech setting forth possible paths for Chinese enterprises to develop overseas presence.

 

He started with a recap of his observation in 2017 of the challenges confronting Chinese enterprises: after years of fast growth in the reform and opening up era, they had started to lose cost advantage but were yet to offer original technologies and products. Since then, the quagmire has been further aggravated by non-economic pressures stemming from trade wars, tech wars, and the pandemic. The need to find a way out, he said, is for real.

 

Through years’ research and observations, Prof. Zhou believed that there are a few directions for Chinese firms to seek a suitable starting point in the global market network. His first inspiration came from Midea Group, a home appliance giant which generates 40% of its total revenues in overseas markets. Even more admirable is that 20% of its overseas sale, or 25 billion yuan, are from overseas production. The company has enshrined the strategy of ‘regional production for regional sale’, a departure from ‘made in China for the global market’. A similar case is Shenzhou International, an apparel manufacturing behemoth, which started to set up multiple factories in south-east Asia well before trade wars launched by Donald Trump.

 

Through field studies, Prof. Zhou said that overseas production by Chinese firms has helped turned local farmers into workers, whose increased incomes have created more demand for domestic and imported products. In other words, the Chinese companies are helping to unlock hidden energy in these traditional economies and foster local markets. Transsion Holdings offers a prime example. Good-quality phones at bargain prices have won it big market shares in Africa. In 2022, it sold 156 million phones and had a turnover of 46.6 billion yuan.

 

Although some other companies have also managed to acquire impressive market shares in African countries, they are likely to run into growth bottlenecks due to limited depth of the markets, said Prof. Zhou. Trassion’s top executive admitted that the company needs to ‘set sail from Africa’ for further development.

 

Some Chinese companies go straight to ‘deep’ markets, namely those with high per capita income and consumption power. These tend to be leading firms in their sectors whose primary goal abroad is to improve R&D, rather than sell products. Since acquiring Volvo in 2010, Geely has made Goteborg, Sweden, an important linkage in its network. What draws Geely is the city’s status as the Silicon Valley of Automotives, with tens of thousands of automotive professionals and as home to 98% of Sweden’s car firms and 50% of its truck companies. Geely has vastly expanded its presence in the city by developing an advanced complex that hosts incubators, local industrial firms, and innovation bases for two universities. Prof. Zhou believed that high productivity makes expensive labor costs highly worthwhile.

 

When assessing a region, its territorial and populational sizes are not as important as the quality and density of its exchange with the world in such fields as technology, investment, trade, and culture, said Prof. Zhou. In the market economy, firms should not subject themselves to geographical constraints. Selecting a suitable foothold in the global market network and being bold in pushing the width of business presence are possible paths amid today’s uncertainty-filled environment, he said.

Prof. Zhou Qiren: Seeking Linkage in Global Network

Dec 15-2023   



In a recent summit by Caixin, a leading business media group, Prof. Zhou Qiren of the NSD delivered a speech setting forth possible paths for Chinese enterprises to develop overseas presence.

 

He started with a recap of his observation in 2017 of the challenges confronting Chinese enterprises: after years of fast growth in the reform and opening up era, they had started to lose cost advantage but were yet to offer original technologies and products. Since then, the quagmire has been further aggravated by non-economic pressures stemming from trade wars, tech wars, and the pandemic. The need to find a way out, he said, is for real.

 

Through years’ research and observations, Prof. Zhou believed that there are a few directions for Chinese firms to seek a suitable starting point in the global market network. His first inspiration came from Midea Group, a home appliance giant which generates 40% of its total revenues in overseas markets. Even more admirable is that 20% of its overseas sale, or 25 billion yuan, are from overseas production. The company has enshrined the strategy of ‘regional production for regional sale’, a departure from ‘made in China for the global market’. A similar case is Shenzhou International, an apparel manufacturing behemoth, which started to set up multiple factories in south-east Asia well before trade wars launched by Donald Trump.

 

Through field studies, Prof. Zhou said that overseas production by Chinese firms has helped turned local farmers into workers, whose increased incomes have created more demand for domestic and imported products. In other words, the Chinese companies are helping to unlock hidden energy in these traditional economies and foster local markets. Transsion Holdings offers a prime example. Good-quality phones at bargain prices have won it big market shares in Africa. In 2022, it sold 156 million phones and had a turnover of 46.6 billion yuan.

 

Although some other companies have also managed to acquire impressive market shares in African countries, they are likely to run into growth bottlenecks due to limited depth of the markets, said Prof. Zhou. Trassion’s top executive admitted that the company needs to ‘set sail from Africa’ for further development.

 

Some Chinese companies go straight to ‘deep’ markets, namely those with high per capita income and consumption power. These tend to be leading firms in their sectors whose primary goal abroad is to improve R&D, rather than sell products. Since acquiring Volvo in 2010, Geely has made Goteborg, Sweden, an important linkage in its network. What draws Geely is the city’s status as the Silicon Valley of Automotives, with tens of thousands of automotive professionals and as home to 98% of Sweden’s car firms and 50% of its truck companies. Geely has vastly expanded its presence in the city by developing an advanced complex that hosts incubators, local industrial firms, and innovation bases for two universities. Prof. Zhou believed that high productivity makes expensive labor costs highly worthwhile.

 

When assessing a region, its territorial and populational sizes are not as important as the quality and density of its exchange with the world in such fields as technology, investment, trade, and culture, said Prof. Zhou. In the market economy, firms should not subject themselves to geographical constraints. Selecting a suitable foothold in the global market network and being bold in pushing the width of business presence are possible paths amid today’s uncertainty-filled environment, he said.