Migrating up industrial chain key to stability

Strengthened cooperation with ASEAN demonstrates nation's lasting resilience

Chinese companies should focus on integrating their overseas investments with the development of global industrial and supply chains, particularly in areas where China has a competitive advantage such as new energy vehicles and green power generation, said experts and business owners.

They said such a strategy would not only allow Chinese companies to migrate toward the upper end of offshore industrial chains, but also facilitate collaboration with industrial upgrading at home.

As a number of Chinese companies aim to become multinational corporations in the next stage, the globalization process in the coming decade will differ significantly from that of the past 10 years, said Lawrence Jin, head of Deloitte's global Chinese services group.

Despite the size of their businesses or staff numbers, many Chinese companies are not yet considered true multinationals, he said, adding that their main focus has been on mergers and acquisitions over the past decade.

To address the challenges posed by geoeconomic shocks and the sluggish global recovery, Chinese companies can adopt joint venture strategies or establish extensive alliances with multinational corporations to expand their international presence, according to Wang Huiyao, president of the Center for China and Globalization, a Beijing-based think tank.

Wang said industries such as new energy vehicles, photovoltaic power generation and climate change solutions — which are growing rapidly or have significant competitive advantages — can meet the requirements of many countries that seek greener innovation-driven growth.

Echoing this view, Lu Jinyong, a professor specializing in overseas development at the University of International Business and Economics in Beijing, suggested that China's ODI should be combined with the development of a global industrial and supply chain led by Chinese companies in the coming years.

Lu emphasized that this approach will not only enable Chinese companies to move up the industrial chain and break away from their current position in the midrange space or lower end, but also facilitate domestic industrial upgrading.

While Chinese companies can learn from successful multinationals and prioritize technological innovation, they must also recognize that the global investment landscape has been significantly impacted by the COVID-19 pandemic, geopolitical tensions and rising anti-globalization sentiment, said Chai Haitao, former director-general of the policy research department at the Ministry of Commerce.

With strengthened cooperation between China and the Association of Southeast Asian Nations demonstrating the strong resilience of Asian supply chains, ASEAN markets will be promising destinations for Chinese companies to invest in, and such activity will support the tangible growth of the Belt and Road Initiative, Chai said.

Despite facing an adverse external environment, China's ODI rose 5.2 percent year-on-year to 985.37 billion yuan ($144.91 billion) in 2022, said the Ministry of Commerce.

At the same time, more than 80 percent of Chinese companies were optimistic about growth prospects of foreign investment, and about 90 percent were sanguine on investment opportunities in signatory countries of the Regional Comprehensive Economic Partnership pact, according to a new survey released by the Beijing-based China Council for the Promotion of International Trade in late February.

After China optimized its COVID-19 response measures and resumed quarantine-free cross-border travel in January, more domestic companies will seek business opportunities abroad this year for both building factories and securing orders, said Gao Yuanyuan, president of the Beijing-based China Association for International Economic Cooperation.

To better adapt to the changing business environment in global markets, the growth of China's ODI will be driven by domestic companies' improved strategies, with investment mainly flowing into sectors including leasing and business services, manufacturing, and wholesale and retail in 2023, said Xiang Lehong, chairman of Loctek Ergonomic Technology Corp, a Ningbo, Zhejiang province-based office products manufacturer.

The company announced in January that it will invest more than $100 million to build an overseas warehouse park in California this year to bolster its sales and offer warehousing and logistics services to other Chinese exporters selling to the United States.