Chinese Business Executives Discuss Investment Challenges Abroad

May 11, 2015

For Chinese companies investing overseas, some leaders say the learning curve is sharp, and often painful.

"It's like a young person growing," said He Dongdong of Sany Heavy Industry. "He has to fall, he has to learn lessons. You have to suffer. The pain is normal. But don't look at Chinese firms and laugh at them, they will learn and grow very fast. You can give advice and help them."

Those growing pains were the subject of a panel during the Duke International Finance Forum at Duke Kunshan University.

"We need to adapt to the change of the times," said Gao Xiqing, former president of China Investment Corporation (CIC), which manages more than $500 billion of China's foreign currency reserves. Gao moderated the panel.

"The U.S. is a reference system for China," said Yang Guohua, former deputy director general of China's Ministry of Commerce. The question for China, Yang said, is this: "Are you going to do something better than the U.S., or are you going to copy them?"

Vice president of a heavy machinery company with than 50,000 employees worldwide, He Dongdong knows the legal struggles Chinese companies can sometimes face in the U.S., where Sany is suing and being sued over various issues. He said the legal battles have cost the company millions. He stressed the need for firms to have an "organic local team" in any country where they do business.

"Make global local," he said. "Have a local team, and hire the best lawyer and accountant. You will spend more money but you are safer."

He Linbo, senior managing director of private equity for CIC, said Chinese companies should not be deterred by the potential for legal challenges when doing business abroad because each situation is different. But, He said, the linguistic and cultural barriers alone between China and other countries can be enough to torpedo a deal.

"Maybe we use the same words, but we don't mean the same thing," he said. "We must make sure people understand the Chinese perspective. Otherwise it would be like a chicken talking to ducks."

Liu Hong, former general manager of UBS Securities Co., has researched Chinese investments in Africa. She said it's essential for Chinese firms to learn the customs traditions and laws of the countries in which they invest.

"For a China enterprise to go global, you need to ask, what is the DNA of your company?" she said. "Can it be contextualized overseas? Can it work? What adjustments do you need to make? Why do you need to go global?"

Liu said bribery is commonplace in China but that a company that expects the same to be true elsewhere is not well-prepared to go global.

"Some people in China think it is not a big deal to find their way with money," she said. But in other countries, bribery will get you more punished than the person accepting the bribes, she said. "You have to do as the Romans do."

Ultimately, success for Chinese firms overseas is a matter of adaptability, He Linbo said.

"You change yourself," he said. "You don't change the environment."

David Robinson, a Duke University Fuqua School of Business professor and one of the conference moderators, said it's clear the political, cultural and legal challenges for Chinese cross-border firms are tightly woven.

"It's not right to think about these as separate challenges," he said, "but four facets of the same challenge."

Contact Info

Gregory Phillips
Duke University
The Fuqua School of Business
100 Fuqua Drive
P.O. Box 90120
Durham, NC 27708-0125

Tel: 1.919.660.7801
Email: gregory.phillips@duke.edu

Erin Medlyn
Duke University
The Fuqua School of Business
100 Fuqua Drive
P.O. Box 90120
Durham, NC 27708-0125

Tel: 1.919.660.8090
Email: erin.medlyn@duke.edu