Chinese Firms Need ‘Second-time Entrepreneurship’ Mindset When Expanding Overseas, Business Consultant Says
During the recent China International Import Expo, insight was provided into the mindset needed for Chinese companies aiming to expand internationally. Raymond Moh, a senior advisor at Singapore-based business consultants Cambridge Advisers, emphasized the importance of adopting a ‘Second-time Entrepreneurship’ mentality. Companies should be prepared for the challenges akin to building a startup anytime they move beyond Chinese borders.
Drawing from years of experience, Moh highlighted the common hurdles Chinese businesses encounter internationally. The journey is seldom smooth for any company venturing abroad, with unprecedented challenges often arising. Companies must be mentally equipped for these challenges, treating their expansion like starting anew in unfamiliar territory.
An illustrative case involved a Chinese firm focused on digital urban planning that successfully entered the Malaysian market. Despite its presence, the company struggled to secure government contracts because local policies favored domestic businesses over foreign firms for specific procurement values. To navigate this, adjustments were made to the company’s ownership structure, partnerships were established with local entities, and tender bids were resubmitted.
Although Malaysia welcomes Chinese investment, its legal landscape intertwines British common law with Islamic law, presenting unique challenges. A thorough comprehension of local laws is crucial to avoid contractual pitfalls and legal disputes in future dealings, Moh advised.
Strong Demand for Overseas Expansion
Despite these challenges, there is a burgeoning interest among Chinese companies to explore international markets. Some are pursuing untapped markets, while others seek to align themselves with downstream clients or establish alternative supply chains.
Notable Opportunities in Southeast Asia
Home to 11 countries, including Singapore and Malaysia, Southeast Asia is a region brimming with potential. It boasts a population of 683 million, with more than half residing in urban areas. From 2021 to last year, Chinese manufacturers invested over CNY40 billion (USD5.6 billion) in the region, outpacing their investments in Europe and Latin America.
Moh identified significant opportunities for Chinese enterprises within Southeast Asia. Chinese electronic products, known for their affordability and quality, resonate well with local populations. In the business-to-business arena, clients may not necessarily be local, with products often exported to Europe or North America.
An example of leveraging such opportunities is Mixue Ice Cream & Tea. The Chinese brand has seen considerable success, opening 2,000 outlets in Indonesia, driven by a strategy focused on rapid turnover and minimal profits.
For Chinese companies in the business-to-consumer sector within Southeast Asia, Moh recommends finding local sales channels or establishing stores with considerable space, even if not in the most popular cities.
Manufacturing firms encounter more complex issues, such as supply chain diversification, organizational design, and the use of free trade agreements. A strategic approach includes local integration, such as producing some parts or sourcing materials locally, which bolsters supply chain resilience and mitigates risks.
Adapting to Policy Changes
Policy shifts, such as the recent cessation of tariff exemptions on Chinese photovoltaic items exported from Cambodia, Malaysia, Thailand, and Vietnam by the US and other countries, are predictable yet challenging.
Even as North American tariffs rise, some Southeast Asian countries like Malaysia encourage the installation of solar panels, presenting an opportunity for Chinese companies manufacturing locally to take advantage of the renewable energy developments.
Moh concluded that overseas expansion embodies both science and art, necessitating a structured approach for sustained growth while also being adaptable to policy changes or unforeseen circumstances.
Finally, Cambridge Advisers and the National University of Singapore Business School are set to release a compliance and governance guide specific to Singapore. They plan to publish a second guide aimed at assisting foreign businesses, including Chinese companies, in navigating the Southeast Asian market. This guide acts as a compass for minimizing risks and enabling sound decision-making as businesses venture into the region.
