Multinationals feeling pressure of Chinese companies
Updated: 2012-05-26 10:09
By Andrew Moody (China Daily)
Foreign multinationals are increasingly having to glance back over their shoulder to make sure they are not being outpaced by fast-paced Chinese entrepreneurs.
The growing strength of Chinese companies - both State-owned and in the private sector - has been highlighted in two recent reports.
Last month the China Europe International Business School 2012 Survey, Challenges and Successes for Foreign Companies in China, highlighted that competition from Chinese firms was now the second biggest challenge for foreign multinationals doing businesses in the country.
Of the 254 respondents to the survey - many of them CEOs of major foreign businesses - 90 ranked competition from indigenous enterprises as the biggest challenge.
In a separate survey, the 2012 White Paper of the American Chamber of Commerce China, more than two-thirds (68 percent) of respondents said they had faced increased competition from Chinese firms, with a third saying that this competition had "increased greatly". The period measured was between 2011 and 2010.
AmCham, which represents 1,200 businesses in China, claims some of the competition was unfair, saying that Chinese companies often receive preferential treatment.
"AmCham China member companies are not seeking to hold back competition; they just want to make sure that competition occurs on a fair playing field," says Ted Dean, chairman of AmCham China.
"We have seen specific examples in terms of credit where local competitors are able to get cheap financing, and in terms of taxation where local companies may pay much lower tax than foreign companies, and in terms of regulatory policy where local competitors may have much more favorable regulations."
Regulatory factors are unlikely to be the only reason for increased competition.
Some argue the financial crisis, which has forced many Western companies to cut back on investment, has caused a shift in the balance of power.
Meanwhile, Chinese companies, often cash-rich and less dependent on capital markets to raise funds, have taken advantage of depressed asset prices in Europe and the United States and have strategically bought companies that have boosted their competitiveness.
Fosun, one of China's leading private conglomerates, alone has set aside $2 billion to acquire stakes in medium-sized technology companies in Germany.
Speaking from Miami, Florida, Edward Tse, chairman, Greater China for management consultants Booz & Co and author of The China Strategy, believes the economic crisis has tilted the balance.
"It has really given Chinese companies the opportunity to step up. While some of the multinationals have been reducing their investment, Chinese companies have continued to build up their strength. They have been acquiring foreign companies in order to acquire technologies and capabilities," he said.