When China’s ‘go global’ investment strategy meets protectionism
06 March 2009
There’s a collision looming as protectionist sentiment rises and Chinese investors ramp up their overseas forays into developed and emerging economies. Well-planned communications can avert a repeat of Chinese companies’ difficulties in the US and other Western markets which have led to deals being blocked.
Some interesting developments in past few days suggest China’s companies are getting closer to a significant expansion which is being eagerly anticipated particularly by cash-hungry businesses in the West as well as bankers and advisers:
- China Investment Corporation, the nascent sovereign wealth fund, is reportedly switching its focus to commodities, seeking investments in mining and natural resources around the world [An aside: the ex-CEO of mining giant BHP was recently appointed head of Singapore's SWF, Temasek]
- The President of Chinalco, the world’s second largest alumina producer which wants to take a US$19.5 billion investment in Australian miner, flew down under to lobby government decision makers and stakeholders. He was seeking to allay concerns a Chinese state-owned enterprise taking a stake in what are said to be some of Australia’s most important mines;
- There are other Chinese forays also in Australia as well as Russia, Brazil and Venzuela, the New York Times reported two weeks ago;
- The Chinese Government will help small and medium enterprises enter international markets, said Premier Wen Jiabao at the National People’s Congress [report from South China Morning Post, subscription required]. This represents an expansion of China’s ‘go global’ policy encouraging companies to expand abroad.
There are steps which companies expanding internationally during this time of rising protectionism can take to minimise the risk of local backlash and protectionist sentiment:
- Be open and transparent;
- Communicate proactively with government in particular;
- Explain the benefits of investment. Emphasise the importance of an equity or cash infusion for your local partner during these credit-starved times;
- Actions and messages should address the motivations (fears and desires) of local stakeholders. Rely on research to test their resonance.
- Adopt a local face, while retaining characteristics of your origins. Realise corporate image is tied to country image.