Braving the fallout of COVID-19 pandemic, SMEs switch gears to expand overseas
China’s small and medium-sized enterprises (SMEs) hoping to succeed overseas need to improve safety and risk control capabilities by cooperating with local governments and service providers in the COVID-19 era, experts said.
This is essential as international trade has been affected in many ways due to the pandemic’s impact on supply chains, industrial chains, finance and human capital flow, they said.
SMEs often experience a range of difficulties when they try to go global in accordance with the country’s call. On the one hand, lack of access to reliable, correct and useful information, ordinary networks of contacts in local communities, inadequate skilled human resources pose a major problem. On the other, access to long-term financing is hard to come by. Challenges relating to risk control also hold back SMEs from business trials overseas, said Shen Kaitai, chairman of Jiang Tai International Associates, an association of insurance brokers worldwide that hosted an online forum last month from Beijing.
According to SME circles, the pandemic has introduced more uncertainties. Many countries have declared they will move back home major industries involving national security. Once the global landscape for the manufacturing industry changes, opportunities for Chinese companies will likely shrink.
Rising debt defaults among companies and governments worldwide due to badly hit finance markets create headwinds for Chinese SMEs seeking financing. Besides, some countries have tightened foreign investment restrictions, which will increase the cost of entering overseas markets for newcomers, Shen said.
Wang Wen, executive director of the Chongyang Institute for Financial Studies, which is part of the Renmin University of China, said: “Impact of the pandemic will be great and long-term. Entrepreneurs should have a clear judgment about this factor. They need to follow the latest developments relating to the pandemic and international political structure. Going global needs careful planning. It’s more important to go far than to go fast.”
Shi Zhan, director of the World Politics Center of Beijing-based China Foreign Affairs University, said consumption, trade, production and logistics worldwide are tending to stagnate or undergoing a difficult recovery. “Though epidemiologists can, to some extent, predict the trend of the epidemic, its impact on economic activities is hard to forecast considering the complexity of the global supply chain.
“Chinese companies, especially private enterprises and SMEs, should not be anxious or impatient. Opportunities still outweigh challenges for Chinese manufacturers to go global in the post-COVID-19 period.”
Study of local policies, the ability to avoid disaster-prone locations, actively joining local communities and taking advice from third-party service providers … these are some of the tips a new targeted guideline released at the forum offered to Chinese companies to better localize in overseas markets.
The guideline also suggests building “firewalls” to secure core technologies, intellectual property and individual information safety. Prearranged planning for safety emergencies, public relations issues and supply-chain disruption is also important. Domestic companies should become members of the Chinese chambers of commerce in foreign countries, to establish links with business partners upstream and downstream, and receive real-time updates of local rules and fulfill social responsibility.
At the forum, operators of overseas parks also put forward ideas for Chinese SMEs in ensuring their operations remain safe in the current COVID-19 context.
Hofusan Industrial Park, the first China-invested industrial park in Mexico, said it aims to provide onestop Chinese language services for Chinese companies to expand into Northern American markets, and create a cluster for Chinese competitive industries overseas.
Wu Guangyun, vice-president of the park, suggested companies should enhance competitiveness and become irreplaceable with their unique techniques, quality and brands, and actively take a part in the reconstruction of the global chain.
Zhao Di, chief representative of Thailand-based WHA Industrial Park in China, said it tried out new methods to attract Chinese companies. For instance, it helped them to design a global strategy, settle down in Thailand quickly, recommended local clients and helped them to establish contact with local raw material suppliers. All these measures helped increase the conveniences for Chinese capital seeking to enter the Thai market.
Zhao suggested Chinese private companies hoping to find a firm foothold in an overseas park should evaluate various factors like the country’s relations with China, stability of its political environment, the level of development of legal systems, preferential policies, risks in investment, cost of operations, cost of living, the number of reputable companies in the park, distance from ports, infrastructure, convenience of living and services it can offer.
By November 2019, about 5,400 companies had settled in overseas economic and trade cooperation zones, with a total investment of more than $41 billion, and may have created about 370,000 jobs, data from the Ministry of Commerce showed.