The five trends of Chinese enterprises accelerating to climb the global value chain "going global" contain opportunities

Under the new normal of the epidemic, what is the "going global" situation of Chinese enterprises? This is undoubtedly an important topic of current attention.

"In the medium to long term, The competitiveness of Chinese enterprises in the international market is increasing, and Chinese enterprises will participate more extensively and deeply in the adjustment of global industrial and supply chains in the post-epidemic era. 'Based in China, looking to the world' is the only way for Chinese companies to grow into global leaders, so 'going global' will remain the inevitable choice for more Chinese companies in the future." Zhou Zhaomei, global head of Ernst & Young's Overseas Investment Business Department in China, said that under the new normal, There will be five development trends for Chinese enterprises to "go global".

Opportunities and challenges coexist

On the one hand, Chinese enterprises can actively "go global" to seek a broader development space in the global market for Chinese products, Chinese technologies and Chinese services. On the other hand, strengthening investment cooperation between Chinese enterprises and some leading overseas enterprises can also help Chinese enterprises to climb up the global value chain more rapidly.

The report shows that although coVID-19 has slowed down Chinese companies' "going global" in the short term, the Chinese government adheres to the concept of win-win cooperation and common development with other countries to build an open world economy. China's domestic economy is the first to recover, and Chinese companies continue to accumulate energy. Thanks to the rapid and effective prevention and control measures against the epidemic, China's economy recovered rapidly in the second and third quarters of this year and achieved a V-shaped rebound. The rapid recovery of industrial production, recovery of exports and gradual stability of employment have all helped Chinese enterprises stabilize their domestic businesses and ease their financial pressure. In the future, Chinese enterprises can focus on targets with more synergies with the domestic real economy when deploying overseas investment opportunities.

The global economy has entered a recession due to the coVID-19 outbreak. On the one hand, uncertainty makes it difficult to estimate the return on investment, and cross-border traffic restrictions also make companies less willing to trade. On the other hand, demand for corporate restructuring and sales has increased due to the recession, while lower valuations have further increased the attractiveness of projects to invest in.

"In the current uncertain market environment, Chinese companies interested in overseas deployment need to constantly evaluate their investment strategies and portfolios to find high-quality investment targets," zhou said. Chinese enterprises should also pay more attention than before to the investigation of the macroeconomic environment of host countries, and pay more attention to the assessment of the investment environment and development potential of the region as a whole.

According to the report, the epidemic has driven the adoption and innovation of many new technologies in remote business, education and health care, which will be adopted after the epidemic due to increased efficiency and lower costs. For multinational enterprises, business and team layout will be more flexible, and the new team cooperation mode will be conducive to Chinese enterprises to absorb more international talents, so as to better expand international business.

Five trends hold promise

Looking ahead, the report identifies five trends for Chinese companies to "go global" :

First, focus on the opportunities of digital transformation in traditional industries. Broadening new scenarios for the application of science and technology and promoting the integration of digital technology and the real economy will be the focus of development. In the future, enterprises in traditional manufacturing and consumer goods fields will accelerate digital transformation. Although many overseas countries have introduced stricter review mechanisms and restrictions on investment in cutting-edge science and technology, there will still be more investment opportunities in low-sensitive areas driven by digital, such as advanced manufacturing and application software development.

The second is the "China +N" development mode of supply chain. For China's export-dependent enterprises, overseas market is as important as domestic market, so the establishment of "China +N" supply chain structure would be the ideal model. "Developing countries with younger populations, more potential for future growth and proximity to mature developed markets will be more favored when it comes to 'N'," said Lu Chen, global head of tax at Ernst & Young's Overseas investment business unit in China. It is expected that Chinese enterprises will speed up the establishment of regional supply chain centers in countries and regions along the Belt and Road."

Third, traditional and new infrastructure construction drive to encourage Chinese enterprises to "go global". In recent years, Chinese enterprises have further expanded their advantages in overseas infrastructure construction, creating a foundation for relevant products and services to go global. The epidemic has driven up demand for traditional infrastructure, represented by transport, and for new infrastructure, represented by health facilities and information infrastructure. This will directly benefit relevant leading Chinese enterprises to "go global".

Fourth, new energy industry to meet the development opportunities, Chinese enterprises to accelerate the distribution of high-quality overseas assets. The epidemic has brought opportunities for energy transformation, and in the future, new energy-related industries will become a hot area for Chinese companies to invest overseas. Lv Chen suggested that China should actively invest overseas new technology in the field of new energy, strengthen energy technology cooperation with the advanced countries, and actively explore diversified way of cooperation to achieve win-win situation, and also should push China related new energy capacity and equipment of "going out", actively with advantage of industry chain upstream and downstream enterprises overseas investment and cooperation.

Fifth, geopolitical risk prevention and control has become the "new normal". The outbreak has made geopolitical risks more prominent and "normalized". Chinese enterprises need to pay close attention to foreign investment policy changes in overseas countries before investment, and pay attention to risk control and compliance after investment. In addition, In the process of "going global", Chinese enterprises should pay more attention to the cultural understanding of the host country and build trust with the local government and people. Actively fulfill corporate social responsibility, and better achieve mutually beneficial cooperation with the host country.