Asia Pac Local Partnerships


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Asia Pac Local Partnerships

  1. 1. Helping yourorganisationgrow in China3 whitepapers to help you understandthe challenges you may face Working and Winning Together with Local Partnerships Security and the Speed of Change Balancing Growth and Impact
  2. 2. Helping your organisation grow in China Working and Winning Together with Local PartnershipsSuccess in China for multinationalsIn the 10 years since China joined the World Trade Organisation (WTO), the economy hasgrown significantly as a result of widespread market reforms. Membership of the WTOand deeper integration into the global economy have been associated with rising levels ofprosperity and ongoing development. Over the past decade, GDP has grown at an average9 percent per year, fuelling domestic consumption. Foreign direct investment is projected toreach another record high this year, expected by the Government to exceed US$106 billion,up from US$71 billion in 2001. Foreign direct investmentAll this stands China in good stead to weather well the current global economic storm. And is projectedit strengthens the incentives for foreign businesses to build opportunities both in China and to exceedalso with Chinese brands as they go global. Intelligent ‘win-win’ partnerships are the key to US$106 billionsuccess in sectors such as retail, pharmaceuticals, financial services, ICT, natural resources, as this year, upwell as electric and hybrid vehicles. from US$71The influential World Investment Report from the United Nations Committee on Trade and billion in 2001Development (UNCTAD) in July 2011 confirmed China continued to receive the most ForeignDirect Investment (FDI) among developing economies and was second in volume only to theUS. Reflecting on this, the Ministry of Commerce committed to further open the world’s mostpopulous market. The services sector would be subject to further liberalization, proceduressimplified and approval authority devolved to local governments. These are welcome stepsforward for international businesses operating in China a decade on from joining the WTO. BT China Thought Leadership 1
  3. 3. In the post-financial crisis world, China has been a bright spot for companies operating China has been internationally, providing higher levels of profit and revenue growth this year according to a survey by the American Chamber of Commerce in China, which also reported confidence a bright spot levels topping pre-2008 levels. for companies operating Ongoing market opening is crucial for China’s continued economic growth, businesses internationally, operating internationally and the global economy. A number of factors will encourage further providing higher opening: the prospects for the renminbi, China’s currency, to become a reserve currency levels of profit alongside the likes of the US dollar, yen and Euro sometime in the future; competitive challenges from other BRIC economies; Russia’s likely accession to the WTO soon; and the and revenue growth of bilateral trade deals especially as the Doha round has faltered eg US and EU with growth this year Korea as well as India and possibly Japan. On the ground in China, the picture for multinational companies is more mixed and complex. Approval for acquisitions or investments in Chinese companies cannot be taken for granted, and concerns have been expressed about policy, regulatory and funding advantages for domestic firms as well as FDI caps and Intellectual Property Right (IPR) issues in some areas. Whatever the reality is, in terms of government treatment of Chinese and international companies, there can be no doubt that competition is intensifying in a growing market. The need for glocalisation The key to success for multi-nationals in China can be described as global and local coexistence - an approach which aligns with the Chinese concept of “Yin Yang” where polar opposites seem contrary forces but are actually interconnected and interdependent on each other. Some call this ‘glocalisation’. Foreign companies operating in China need to ask themselves: how can we work and win together with local partnerships? They can ask: what is our unique selling point? How does our product, technology or business model differentiate us in a competitive market or provide opportunities to partner with local companies? And can local partnerships be built outside China? BT’s approach to the China opportunity is based on cooperation, not competition. Our most significant partnerships involve sourcing equipment for customers’ networks around the Our most globe from Huawei and ZTE. We are working with China Unicom and China Telecom to serve significant MNCs in China with ICT services offering tailored solutions (eg for Thomson Reuters, DHL and partnerships financial services providers) and to help them serve Chinese MNCs around the world with our involve sourcing unique global network scale. equipment for customers’ networks around the globe from Huawei and ZTE2 BT China Thought Leadership
  4. 4. Strategic partnerships withChinese firms are vitalThese enable MNCs to get closer to local networks while remaining global.The formation of strategic partnerships as well as joint ventures, and the establishment ofwholly foreign owned foreign enterprises or investments involve complex calculations anddecisions. Much of the uncertainty though on the regulatory front can be minimised throughproactive, informal discussions with government authorities, particularly the Ministry ofCommerce. Institutions and public servants are still developing insights about the approachesand processes which best facilitate foreign investment for the benefit of local and overseasinterests. A consistent, constructive and long term outlook is key.Foreign investment in China appears set to continue growing given the appeal of a market with1.3 billion consumers while global economic growth remains lacklustre generally. At the sametime, China remains open to investment from abroad and the inflow of capital is no longer Foreignthe overriding imperative for officials to consider. China has a strong appetite for the soft skills investment inrequired to develop management and brand expertise, which MNCs are transferring to the China appearsmarket, in order to propel the swelling wave of Chinese companies seeking to go global. set to continue growing givenChinese officials are expressing increasing discomfort with MNCs which continue to treatChina as a place for cheap labour and production. There are increasing signs that technology the appeal of atransfers, R&D and innovation are expected to occur in the China market. market with 1.3 billion consumersInnovation at the heart of ChinaThere is likely to be a shift soon in innovation which will challenge many of the existingassumptions about foreign and local expertise. While product innovation has until now largelybeen driven by MNCs’ investments in design and R&D, growing numbers of local experts witha passion for innovation and creativity are emerging from Chinese universities. For examplesof Chinese innovation, just look at the rise of Huawei which is the world’s largest providerof telecom equipment and a leader in 4G mobile phone technology, Suntech Power with itsbreakthrough solar power technology, BYD with cutting-edge batteries as well as electric andhybrid cars, and Baidu with its massive search engine . MNCs which can build relationships According towith universities, particularly graduate programmes, will benefit from healthier R&D pipelines PwC’s estimatesand stronger design in future for local-born products which blend the best of East and West, a China will havewinning formula for 21st Century consumerist China. the world’s largest marketEffective partnerships and engagement on the ground in China will provide the basis for asustainable, long-term ‘win-win’ for MNCs. The size of the opportunity is staggering, according by 2020to PwC’s estimates which indicate China will have the world’s largest market by 2020. BT China Thought Leadership 3
  5. 5. Offices worldwideThe telecommunications services described in this publication aresubject to availability and may be modified from time to time. Servicesand equipment are provided subject to British Telecommunicationsplc’s respective standard conditions of contract. Nothing in thispublication forms any part of any contract.© British Telecommunications plc 2011.Registered office: 81 Newgate Street, London EC1A 7AJRegistered in England No: 1800000Designed by 63042