Knowing foreign markets matters for going global

Editor's note: As a growing number of Chinese enterprises venture abroad, understanding their role in local economies has become crucial. 21st Century Business Herald spoke to Lin Xueping, an expert of industrial studies, on what Chinese companies should focus on when they expand overseas. Below are excerpts of the interview. The views don't necessarily represent those of China Daily.

The overseas footprints of Chinese enterprises cannot be measured merely by the number of factories they have built. The more pertinent question is what role do these factories play in the local economy.

The overseas businesses of many Chinese companies still focus on establishing factories, equipment and production lines locally, which does not entail the full relocation of supply chains.

The more challenging step is to export innovation capacity alongside production. Many overseas factories of Chinese companies still depend heavily on teams back in China for R&D, design and product iteration capabilities. This model enables Chinese enterprises to set up overseas production capacity rapidly. However, these overseas factories are not yet able to operate independently and engage in local industrial innovation.

When they enter overseas markets, Chinese companies need to understand different working norms, cultures and social rules, while managing compliance, labor relations and community outreach. A company that has been supplying multinational companies or participating in the global supply chain doesn't necessarily have what it takes to operate independently overseas.

Localization is not merely about transplanting equipment and management systems, but also about understanding the host society where the business operates. Industrial parks can lend support in this regard by lowering entry barriers concerning land, factory premises and infrastructure and helping enterprises settle in faster. But they cannot resolve all the challenges. For instance, they may not be able to build stable communication channels with local governments on a company's behalf, nor automatically foster trust within communities.

Enterprises should adopt a more proactive approach to establishing essential communication channels with local media and communities. By articulating the jobs they create, the taxes they contribute and the benefits they provide to local communities, they can make their localized value tangible. Successful overseas operations demand more than legal compliance; they also require becoming an understandable and approachable part of the host society.

Treating the Asia-Pacific Economic Cooperation as a monolithic bloc tends to obscure the vast differences among its member economies. It encompasses mature economies such as the United States alongside some Southeast Asian economies still striving for industrialization. Chinese enterprises face diverse industrial policies, resource allocations and political and economic priorities across APEC economies.

APEC's value lies not in transforming its economies into a single customs union, but in enabling economies at various stages of development to reach a consensus and identify opportunities for cooperation in trade, investment and industrial development. Chinese enterprises should seek market opportunities while also understanding what host countries aim to gain from such investments.