Why knowledge about China’s business market proves vital for success of international companies
- China, a rising global superpower, leads conversation about regional economic development through its Belt and Road Initiative
- Entrepreneurs and global senior executives hope to benefit from detailed understanding of Chinese business practices
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As the world’s second-largest economy, China is expected to be a driving force of the global economy in this century. Its potential as a market has attracted investors from all around the world.
During the first nine months of 2019 direct investment in China from abroad exceeded US$100.78 billion – a 2.9 per cent increase compared with the previous year, statistics from China’s Ministry of Commerce showed.
There are many reasons China’s business market appeals to international companies, ranging from multinational corporations, such as the technology companies Apple and Microsoft, to regional businesses and start-ups.
The country’s huge population, now at 1.4 billion, has created a huge business market. Its rapidly rising middle-income demographic, which officials estimated to total 400 million in 2018, has also generated high consumer demand for luxury spending, e-commerce and car ownership, a study by the UK trade network China-Britain Business Council showed.
As of December 2018, more than 960,000 foreign companies have been registered to conduct businesses in China, the Ministry of Commerce’s latest survey revealed.
China has also been leading the conversation about regional economic development, most notably through its Belt and Road Initiative (BRI) – an ambitious development and infrastructure project that aims to deepen investment and trade partnerships involving more than 100 countries in Asia, Africa and Europe.
In 2014 it launched the Asian Infrastructure Investment Bank, a multilateral development bank, which offers funds for infrastructure projects across the Indo-Pacific region. The bank, headquartered in Beijing, had a starting capital of US$100 billion, with China issuing the most funds.
Following China’s lead
A report published last year by the United Nations Economic and Social Commission for Asia and the Pacific, titled “China’s economic transformation: Impacts on Asia and the Pacific”, said that in the Asia-Pacific region, which has experienced rapid economic growth based on the adoption of export-oriented development strategies, China stands out in terms of pace and scale.
Yet more importantly, China has been able to successfully move from export- and investment-led growth to consumption- and innovation-led growth, and steer its economy to focus more on service-oriented and high value-added industries.
Three University of Malaya academics, Kee Cheok Cheong, Chan Yuan Wong and Kim Leng Goh, described China’s technological progress “as spectacular as the growth of its economy since 1978” in their article, titled “Technology Catch-up with Chinese Characteristics: What Can Southeast Asia Learn from China?”, which was first published in the The Round Table: The Commonwealth Journal of International Affairs.
They highlighted the unique set of strategies China has used, which combines alliances with foreign companies, business mergers and acquisition, as well as close cooperation between the private, education and public sectors. While every nation has its own set of circumstances, Southeast Asian nations can gain many valuable insights from China’s rapid economic development.
Learning from business leaders
Entrepreneurs and senior executives from around the world are looking to bridge the knowledge gap by gaining a thorough understanding of Chinese business practices and establishing a good network of contacts in the country.
Budi Jonathan Sudharta, CEO of Halodoc, an Indonesia-based digital health care company, said he enrolled on Tsinghua University’s 2019 BRI EMBA Program to gain knowledge of market-entry strategies.
“It is important for me to learn directly from those who are conducting businesses in China,” he said, adding that they could provide valuable lessons about how companies should formulate their plans when they want to expand.
Sudharta was one of dozens of leading businessmen and women who joined the 2019 postgraduate course, which featured lectures, forums and company visits offering the latest business insights about China, including the nation’s role in the development of the BRI.
The BRI EMBA Program at Tsinghua University – one of the oldest and most esteemed universities in mainland China – has attracted accomplished students ranging from start-up entrepreneurs to international business leaders over the years. A typical course runs for between two and three years.
Robin Lo, CEO of J&T Express, an Indonesian logistics and delivery company, said he joined the course because he wanted to master finance skills and expand his business.
“My business is focused on logistics and we see that China is a role model for us,” he said, adding that Indonesia has often looked to China for business ideas and hardware.
Apart from being a major exporter in the world, China is also a global leader in e-commerce. In a clear sign of the nation’s prowess as a logistics hub, online retail sales in the country were tipped to rise to US$1.5 trillion last year – with sales volume exceeding that of the 10 next largest global markets combined – in the McKinsey report, “China digital consumer trends 2019”.
“In business, finance is the main skill that we should master before we can really grow,” Lo said. “That's why I think it's quite important for me to come to China and learn more about China.”
Joel Neoh, founder of Fave, a Malaysia-based loyalty and rewards platform, agreed with Lo that companies often use China as a source of new business ideas.
“I’ve always looked to China for inspiration and [to see] different ways that technology can be applied in different industries,” he said, adding that there were a lot of similarities between business methods in China and Southeast Asia.
Neoh said he hoped to learn from – and team up with – his classmates on the course to bridge the technology gap back home in Malaysia,
Rachmat Harsono, president of PT Aneka Gas Industri, an Indonesian industrial gases company, said he joined the course because of Tsinghua University’s elite status, and because he wanted to explore the new opportunities offered by the BRI.
“Indonesia is part of the Belt and Road Initiative,” he said. “As an Indonesian, I want to learn more about it and how we can help to achieve a better economy.”
Harsono, who studied finance in the US, said he hoped to gain new perspectives in monetary and fiscal policies in China.
“Hopefully by finishing this programme I will have a complete picture of the world, because the missing piece has always been China,” he said. “The US, Europe and all, have always been bombarded [with business coverage] in the media, but not China. So I want to learn a lot from it.”
Chinese nationals who have carved out successful careers overseas are “returning” to catch up on the latest developments in their native country, too.
Zhou Chanyan, a senior executive at Morgan Stanley, has years of experience investing in both China and Southeast Asian countries. She sees Tsinghua University’s course as part of her lifelong learning mission.
“I studied for my [university] degree at Peking University, right next door,” she said. “Coming back to China is very exciting for me, having left for over a decade.
“It’s a perfect programme for me to understand deep down how entrepreneurs and the finance world think, and the thinking process and business model in all the regions. I hope I can make great connections, make long-term friendships and bring what I have done in the last 12 years to the overall programme.”