As Chinese companies become more engaging in world trade, it has become common for many firms to have massive industrial projects overseas. Launching these projects are achievements on their own but managing them sustainably is another story.
Experiences in developing countries
Clothing maker Hodo Group in Wuxi, Jiangsu province operates an economic zone in Cambodia.
“Cambodia is still one of the least developed countries, so it doesn’t have trade tensions with developed nations. For example, some of our car makers face a 78 percent tariff in the US. But if they export from Cambodia, they won’t face any tariff,” said Jack Chen, president of the Sihanoukville special economy zone.
But managing projects in developing countries also comes with its challenges. “The locals used to tear down our walls the night they were built. Our construction sites were frequently vandalized. After some investigations we found out that the locals were worried that once we come in, they won’t have free land for herding,” said Dai Yue’e, vice chairman of Sihanoukville special economy zone.
Today the zone is welcomed by the locals. The company’s chairman said channeling a message of social responsibility is key to turning public perception around.
By hiring locals, Chinese companies in the zone have helped lower the region’s poverty rate from 60 percent to 10 percent.
“Before the zone was set up, the locals earned on average 400 US dollars a year. Now many are factory workers, and they earn on average $1,000 a year”, said Zhou Haijiang, chairman of Hodo Group.
Experiences in developed countries
Investing in developed countries is another story. The Zhejiang-based Chint Group acquired a solar panel factory in Germany in 2014 in order to bring in their smart manufacturing expertise, and also to get around anti-dumping tariffs for China-made solar panels.
Chint was going into a country with strong labor unions. “We accepted 100 percent the management team from the original factory,” said Huang Haiyan, vice president of Chint New Energy.
Huang said managing production lines in Europe usually require a different set of cost-benefit calculations compared to that in China. “We have four shifts for the production line to keep it running 24 hours. In China we only need to prepare 2.5 shifts, because a lot of employees are happy if they have some overtime. But in Germany it’s totally different. They really don’t want to have some overtime work. That’s why in Germany, our factory at least has five shifts”, said Huang.
The companies said lessons like these are critical for any Chinese firm wishing to expand overseas. It can be a matter of survival.