Henry Huiyao Wang: Chinese companies can spearhead a new wave of globalisation
Going global not only defuses the perils of protectionism, it also allows Chinese firms to bring jobs and economic benefits to the world, CCG founder & President writes in South China Morning Post.
Henry Huiyao Wang, founder & President of the Center for China and Globalization (CCG), just published the following piece in his opinion column in the South China Morning Post
At a recent Singapore conference on Chinese companies going global, I spoke on deglobalisation and the emerging contours of Globalisation 3.0. Perhaps more than ever, we need to look ahead to new ideas and concepts to tackle whatever the future holds.
When China started its reform and opening up in 1978, its economy, shaped by autarkic experience and self-reliance, was still “in China for China”. In tapping world-changing market forces, the economy entered a period of “in China for the world” as the country was recast as the world’s factory.
Increasingly complex value-adding industries lifted 800 million out of poverty and boosted the material wealth of our modern world. By 2020, China accounted for 35 per cent of the world’s gross industrial output. Yet trade wars – which started in the first Trump administration in the United States – have once again realigned global dynamics.
In today’s world, it’s no longer enough to do it better and more cheaply. Globalisation is entering a new era. Multipolarity is back. “De-risking” and instability have seen companies face a new period of uncertainty and transformation.
With the rise of trade barriers, tariffs and geopolitical fragmentation, Globalisation 3.0 will increasingly be digitally driven and regionally oriented. Chinese businesses urgently need to adjust their strategies and accelerate the pace at which they go global.
This means shifting from an export-driven growth model towards one characterised by a global presence, overseas investments and cross-border industrial coordination. In other words, we need a strategy for the Chinese economy to be “in the world, for the world”. Chinese companies must go global, distributing their value chains and production systems across countries to serve international customers.
The simple truth is, overseas expansion not only enhances a company’s competitiveness and insulates it from rising protectionism and geopolitical tensions, but also defuses some of the most keenly felt issues with globalisation: the uneven distribution of its spoils among social groups.
It does this by rolling back the loss of job opportunities for skilled labourers and shifting productive capital and tax revenue back to the host countries.
A comprehensive global strategy not only mitigates the risks of trade barriers and tariff conflicts, but also presents new opportunities and models for business and productivity. Geely, which employs 4,000 people in its Volvo plant in Belgium, jointly developed a vehicle architecture platform, centralising production, spreading fixed costs and embracing new productive forces that have led to high-quality products reaching consumers at lower prices.
This drive towards spreading the benefits of globalisation doesn’t just mean investing in advanced economies either. China announced earlier this month plans to remove all tariffs on 53 African economies, in a bid to better spread the benefits of globalisation, trade and development. This is not just about insulation against trade wars and discontent but a sustained and serious commitment to economic inclusion.
A furniture manufacturer recently told me the new US-China trade war tensions present an opportunity for his company to expand globally – he had already built a factory in the United States. As the world’s largest consumer market, the US remains a vital arena for Chinese businesses. This new path can also allow Chinese companies to expand into emerging sectors and areas increasingly closed off to Chinese exports.
A decade ago, Fuyao Glass established an automotive glass factory in Ohio, US, which now employs more than 2,000 workers. The opening ceremony was attended by hundreds, including the state governor and members of Congress. Enormously popular, it serves as a model of China-US business cooperation, exemplifying mutual benefit and win-win results.
Meanwhile, Chinese investment in renewable energy in the US is rapidly growing. Longi Green Energy Technology is in a US$600 million joint venture for a 5 gigawatt solar panel assembly factory in Ohio while Trina Solar had a US$225 million factory in Texas, though this 5GW facility has since been sold. Battery maker Contemporary Amperex Technology Limited (CATL) and electronics manufacturer Luxshare have signalled a willingness to consider manufacturing in the US. The China Railway Rolling Stock Corporation has plants in Springfield, Massachusetts, and Los Angeles, California.
Indeed, the head of Longi Green Energy once shared with me that its US joint venture was made possible through its close cooperation with many local upstream and downstream companies, forming a stable community of shared interests. It was precisely this network of aligned interests that facilitated the successful landing of the project. It was not without its challenges, however: the long-standing hollowing-out of the American manufacturing sector demanded remediation in the form of vocational training programmes.
As Chinese companies expand globally – and they must, lest they be left behind – they should seize the opportunities available for joint ventures and greenfield investments. BYD’s first wholly owned electric vehicle (EV) plant in Southeast Asia opened last year in Rayong, Thailand. Chinese manufacturers, especially in textiles, garments, electronics and solar modules, have rapidly increased their investments in Vietnam, Thailand, Malaysia, Cambodia and Myanmar. Southeast Asia now hosts about one-third of China’s overseas manufacturing foreign direct investment.
The global capabilities of Chinese enterprises offer great promise. Going global will help these companies diversify their risks, expand their sales channels and gain access to global markets. At the same time, it will bring more jobs and economic benefits to the host countries, advancing mutual benefit and shared prosperity. Let us work together to contribute more Chinese wisdom and strength to global peace and prosperity.
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