Financial strength and advanced production lines have enabled Chinese corporations to enhance their competitive edge overseas and, despite global economic uncertainties, most Chinese companies remain bullish in their overseas investment plans, according to a survey by HSBC. The survey of more than 200 Chinese companies found that the difficult global economic climate had had little effect on the firms' appetite for expansion, as 83% of respondents reported an intention to expand offshore and 58% said that they plan to expand their existing overseas businesses.
Half of respondents said that price was one of their key advantages overseas, although many were keen to state that it was not their only advantage. Solid financial strength and advanced technology and production lines were both cited by 40% of respondents as key competitive strengths in foreign markets.
HSBC noted that, as the global economic landscape is shifting, many industries have turned to China as a key market for growth. The China Outbound Survey was HSBC's latest move to acknowledge this shift towards China, and its release followed the appointment of Li Zhen as the bank’s first head of the China outbound desk. Appointed to develop the bank’s China desks in key trade and investment markets, Mr Li’s new position highlights HSBC’s awareness of the growing role that Chinese private and state-owned enterprises are playing in powering China’s economy.
The survey, which was released in January 2013, found that Chinese companies have become confident in their ability to expand internationally. HSBC reported that the main reasons that Chinese firms ventured into foreign markets were to expand their network and enhance their brand image, with 59% and 46% of respondents citing these motives, respectively.
The survey showed that Asia is the main investment region for outbound Chinese enterprises, and 71% of respondents identified Hong Kong, Macao and Taiwan as their favoured destinations due to the strength of their import and export sectors and their low trade barriers.
While investments into North America and Europe were driven by market potential, and advanced technology and R&D, cheaper manpower and the abundance of raw materials in Africa and Latin America were also a draw for Chinese businesses. HSBC found, however, that Chinese enterprises continue to face region-specific challenges. Slowing growth in the US was cited by 58% of respondents as a particular concern, and communication and cultural differences were cited as the main barriers to Latin America for 38% of respondents.
“Despite the overall positive outlook, challenges remain for Chinese companies expanding overseas, including foreign exchange fluctuation and local market competition,” says Mr Li. “HSBC has established China desks in more than a dozen key markets worldwide, with senior bankers dedicated to helping companies tackle these challenges by identifying new business opportunities, accessing financial products and services, and keeping current with regulatory changes in markets, wherever they may go.”