HSBC: Chinese corporate seek expansion of overseas operations

PanARMENIAN.Net - A new HSBC survey revealed a strong appetite for international expansion amongst Chinese corporates with overseas operations, despite the current global economic uncertainty.

The vast majority of respondents (83%) intend to further expand offshore; among them, 58% plan to expand their existing overseas operations while 47% plan to increase their number of entities abroad.

HSBC conducted the survey of over 200 Chinese companies with operations overseas to gain insight into their business needs as they expand internationally.

Interestingly, respondents revealed that they are no longer relying solely on an ability to compete globally based on lower costs. Though half of those interviewed said that price was still their key advantage, the findings also pointed to their solid financial strength (40%) and their advanced technology and production lines (40%) as major strengths when competing overseas.

The main motivations for Chinese enterprises venturing into foreign markets are the ease of trade (69%) and to expand their network (59%). With Chinese companies attaching more importance to brand building in recent years, 46% of companies interviewed indicated that their overseas expansion was pursued with the purpose of improving their brand image.

The survey revealed that Asia is the major investment region among outbound Chinese enterprises (85%). The overseas markets within Greater China (Hong Kong, Macau and Taiwan) were identified as the favored destinations to set up overseas entities (71%), driven by the strength of the market’s import-export sector, as well as low trade barriers (57%) and favorable investment policies (43%).

Investment in traditional markets such as North America (24%) and Europe (22%) were driven by market potential as well as advanced technology and R&D. Additionally, the emerging markets of Africa (15%) and Latin America (14%) also feature, with market potential a significant draw for the latter (93%). Other important factors that attract Chinese enterprises to these regions include abundant raw materials and resources (Africa 26%, Latin America 28%) and lower costs of manpower, production and transport (Africa 26%, Latin America 24%).

Although the outlook is positive for Chinese enterprises venturing overseas, challenges remain. Companies interviewed cited exchange rate fluctuations (48%), economic slowdown overseas (46%) and competition from the local markets (42%) as their biggest challenges. In Europe and North America, economic slowdown is especially apparent, with 58% and 50% of Chinese companies in the U.S. and Europe, respectively, identifying the slowdown as their main worry, while the main challenges for those in Latin American were communication and cultural differences (38%).