SOEs eyeing foreign markets should prepare for challenges

The road ahead in State-owned enterprises’ exploration of foreign markets will not be smooth. They should prepare for many new challenges originating from the institutional differences between home and abroad, says an article of Beijing Youth Daily.

Here are the excerpts:

SOEs enjoy many preferential policies in almost all fields related to the operation of business. Used to the favorable market environment in China, the SOEs urgently need to adjust their mentality and way of doing business before entering foreign countries.

The Mexican government cancelled Chinese enterprises’ high-speed railway project, and a shopping mall construction project to be undertaken by Chinese enterprises in Cancun. Mexico recently invited China to participate in the construction of a new airport in its capital, mobile wireless network and energy industries. Chinese enterprises should draw lessons from these changes.

It is not uncommon that Chinese enterprises usually encounter the unilateral termination of contracts in foreign countries, mostly because of the political changes in these countries.

The new government in Greece suspended the reform plan of its largest port of Piraeus on Jan 27, the day when it took power. And a Chinese company is the largest stake holder of the projects involved in the plan. With the strong support of State-owned capitals, the company won over these projects after defeating two well-known competitive bidders from Hong Kong and Dubai.

Chinese enterprises should conduct professional risk assessment and analysis of the political, economic and cultural situations of the investment destinations.

The developed countries have fewer political uncertainties and more mature market environment. Chinese enterprises should learn more from some famous investors and multinational corporations to build up their learning curves as soon as possible.

China’s export of investment industrial capacity should not only target at the developing countries. The Chinese enterprises that are already big players in their respective markets should focus more on emerging economies and developed countries.

Enterprises from Japan and South Korea have successfully evolved into global players in the past 40 years. Chinese enterprises should draw lessons from these predecessors.

Participating into international competition does not mean easy money. Some of the enterprises should firstly prepare for losing money before making money.