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在线翻译:
szdaily -> Opinion
Go big or go home
    2017-September-4  08:53    Shenzhen Daily

Winton Dong

dht0620@126.com

CHINA is giving foreign investors more choices and opening more sectors when they come to invest in the country, which has the strongest manufacturing industry as the world’s second-largest economy.

Those moves include allowing global companies to set up new businesses through mergers with and acquisitions of Chinese firms and ensuring that foreign companies can send their profits back to either their home countries or other global markets at any time they want, as well as encouraging them to take part in the ongoing mixed-ownership reforms of State-owned enterprises (SOEs) in China, according to a document released by the State Council in August this year.

Despite the fact that China does not lack capital, it is still very important to boost the flow of foreign capital into the country. While giving more stimulation to foreign companies, those governmental moves will also accelerate the upgradation of China’s economic structure and encourage domestic companies to deepen reform and break monopoly operations.

However, such encouraging governmental moves do not necessarily mean that all foreign-funded firms will be successful and make big money in China since investment in a foreign country is always between laughter and tears.

Every foreign company edging into the Chinese market has a strong desire to go big. With the U.S. fast-food chain McDonald’s Corp. as an example, it forged a new partnership in China in July this year and will expand faster by opening 2,000 new restaurants by 2022 in small Chinese cities.

The expansion strategies of McDonald’s in China are very clear. Firstly, it has localized by finding powerful Chinese partners. The new partnership, jointly established by CITIC Ltd., CITIC Capital, Carlyle Capital and McDonald’s, altogether paid US$2.08 billion for the fast-food chain’s business in the Chinese mainland and Hong Kong. CITIC has more than 1,400 bank branches in China. Moreover, CITIC and Carlyle also boast abundant resources and market expertise in real estate, supply chains, consumer goods and advanced technology. Joining hands is sure to be a win-win formula for all parties concerned.

Secondly, after decades of development, McDonald’s now boasts 2,500 stores in China and has already saturated the downtown areas of big Chinese cities. But they are still burgeoning and warmly welcomed in relatively smaller places, so the new restaurants will be set up mostly in third- and fourth-tier cities.

Thirdly, considering the strong demand for take-out food among young consumers and the population density in China, McDonald’s is developing a customized software system for the Chinese market with a focus on take-away and digitalized services.

With the implementation of these new development strategies, McDonald’s aims high to achieve double-digit sales growth annually during the next five years. Compared with the wonderful maneuver of McDonald’s in China, the performances of some Japanese multinationals are not as impressive.

With some household names from Japan as examples, Toshiba is now at the edge of bankruptcy after its acquisition of Westinghouse, a U.S. nuclear facility provider. Toshiba hoped to diversify into the nuclear sector by the acquisition. However, the Fukishima nuclear explosion in 2011 has made governments all over the world more cautious about the construction of new nuclear power stations. Another Japanese electronics giant Sharp was acquired by Taiwan-based Foxconn in 2016, with the latter aiming to expand its product portfolio including televisions and smartphones. As for Panasonic, the famous Japanese company established in Kyoto in 1918, its business is also shrinking in China after several strategic mistakes, such as sticking to Plasma Display Panel (PDP) TVs for many years instead of developing Liquid Crystal Display (LCD) TVs.

Panasonic’s market occupancy rates in China show its dramatic decline during the past decades. In terms of refrigerators, its market share in China is 1.53 percent, compared with Chinese company Haier’s 27.78 percent. As for air conditioners, its market share is only 0.69 percent, compared with Chinese firm Gree’s 16.2 percent.

During the 1980s and 1990s, these Japanese companies were once household names and dominated electric home appliance markets in China. From my point of view, their frustration in China can be attributed to their refusal to localize and their strong disbelief in Chinese employees. For many years, even in the Chinese market, Japanese multinationals have insisted on using Japanese managers and Chinese employees are rarely seen in top positions.

As a famous saying goes, the taste of an orange changes with the environment. No matter how big a foreign company is, if it cannot advance with the times and adapt to the changing situation in China, it will be doomed to shrink or even have to go home in the end.

(The author is the editor-in-chief of the Shenzhen Daily with a Ph.D. from the Journalism and Communication School of Wuhan University.)

 

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