This is the third in a three-part series looking at efforts by Chinese companies to step out of their comfort zone and expand abroad amid mounting domestic competition, and how this has resulted in learning curves, labour scandals and more diverse supply chains.
When a BYD executive claimed “foreign forces” and some domestic media were “deliberately smearing Chinese brands and the country” on social media in response to a Brazilian investigation that found 163 Chinese nationals working in “slavery-like conditions” at the EV giant’s construction site, veterans in China’s outbound investment field said it seemed like the real problem was being handwaved off.
Some contended that the race to the bottom is so deeply rooted in Chinese business soil – with low costs and low prices forever the golden rule – that it is spreading overseas amid the rapid global expansions of Chinese companies.
Their mindset often entails outcompeting others by submitting the lowest bid, then cutting costs to make that bid financially viable, according to Liu Tanghua, China region general manager of the Terra Regia Industrial Park in Mexico. The BYD saga reminded Liu of his experience more than 20 years ago when he went abroad for the first time to India and Sri Lanka, working as a translator for construction projects under Chinese companies.
“Two decades later, as China is getting much stronger, people think there should be improvements in all aspects,” Liu said. “But such a routine remains the same.”
As more and more Chinese companies build factories overseas amid insufficient domestic demand and persistently elevated trade barriers, experts have warned that transplanting the vicious-competition approach to foreign lands will only serve to backfire, hamper their local operations and hurt the reputation of Chinese firms as a whole.
“Chinese companies have to adapt to the local context: you cannot go to other countries with a certain Chinese way of doing things,” said Dominique Turpin, a professor of marketing and the European president of the China Europe International Business School (CEIBS) in Shanghai.