Why Chinese companies win favor in the "global south"
2024-08-18
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Global Hotspots
Original title: How Chinese companies win favor from the "Global South"
Yan Yu, reporter of People's Daily Overseas Edition
In recent years, the pace of Chinese enterprises going global has been accelerating. In many developing countries, more and more Chinese investors and builders are active. The British magazine The Economist recently published an article saying that Chinese enterprises are developing rapidly in the "Global South" market and gaining competitive advantages.
Staff members take a group photo with the Zhigui system. Photo by Xinhua News Agency reporter Xu Qin
Chinese brands are becoming more and more well-known and influential
In the global South, represented by the vast developing countries and emerging economies, Chinese companies are becoming important partners that are widely recognized and welcomed by the local markets: on the one hand, from clothing to smartphones, from new energy vehicles to solar cells, more and more "Made in China" products are winning over local consumers; on the other hand, in various local development projects, Chinese companies often play an active role as participants or investors.
Taking Latin America as an example:
In Ecuador, Chinese auto brands have a 35% market share in the local market. At the same time, about 30 original or assembled motorcycle brands from China are operating locally, and some brands and models have become the first choice of local consumers. Jose Awad, director of the Economic Affairs Department of the Ecuadorian Automobile Industry Association, believes that "Chinese cars have obvious advantages in design and configuration."
In Mexico, the popularity of Chinese brands continues to rise, with mobile phone manufacturers such as OPPO and car companies such as BYD becoming the main tenants of large billboards at the country's airports. Data shows that in 2023, Mexico will be the second largest export destination for Chinese cars after Russia.
In Colombia, Chinese companies' investment in the country has continued to grow since 2020. Oscar, Commercial Counselor of the Colombian Embassy in China and Director of the Colombian Trade, Investment and Tourism Bureau in China, said that 10 years ago, it was difficult to see Chinese companies in Colombia, but now China has become one of the most important investors in Colombia, and its investment areas are becoming more and more diversified.
Chinese companies are also active in developing countries in Asia, Africa and other regions. The Economist magazine published an article stating that from Indonesia to Nigeria, the influence of Chinese brands is becoming increasingly significant. Today, electronic equipment manufacturer Transsion has occupied half of the African smartphone market; medical equipment manufacturer Mindray has become the leading supplier of patient monitoring systems in Latin America; Chinese electric vehicle and wind turbine manufacturers are also expanding rapidly in developing countries. The article pointed out that the overseas development of Chinese companies has shown a trend of dual tracks: one is to target the huge demand of billions of consumers in the global South, and the other is to actively deploy a global production network through the deep integration of the global supply chain.
Song Wei, a professor at the School of International Relations of Beijing Foreign Studies University, analyzed in an interview with our reporter that Chinese companies that are currently performing relatively well in the global south mainly include the following categories: "First, infrastructure companies, which have traditional advantages. In the early years, they entered developing countries with the Chinese government's foreign aid projects and established a good reputation and word of mouth in the local area, laying the foundation for opening up markets in the global south in recent years; second, pharmaceutical, medical device and other livelihood companies, which play an active role in China's efforts to help developing countries improve people's livelihood; third, companies in emerging fields such as digital economy, artificial intelligence, and new energy vehicles. These Chinese companies have grown rapidly in recent years and are accelerating their pace of entering the global south."
Internationalization and globalization have become important development directions for Chinese enterprises
Why are Chinese companies thriving and gaining favor in the global South?
Zhou Zhiwei, deputy director of the International Relations Office of the Institute of Latin American Studies of the Chinese Academy of Social Sciences and researcher, analyzed to this newspaper that one important background for the accelerated entry of Chinese companies into the global South and their popularity there is that in recent years, China's high-quality economic development has been steadily advanced, and China's modernization drive has achieved new historic achievements. Under this overall upward trend, China's overseas investment capabilities have rapidly increased, and internationalization and globalization have become important directions for the development of Chinese companies.
In 2023, China's GDP will exceed 126 trillion yuan. According to data released by the Organization for Economic Cooperation and Development, China's manufacturing output accounts for 35% of the world's total output. In this regard, Hussein Askari, deputy director of the Swedish Belt and Road Institute and distinguished researcher at the Guangdong Institute for International Strategy, pointed out that China's economy is showing a steady trend of sustained growth. Chinese companies have leapt into the world's leading position in many fields such as infrastructure construction, construction machinery and telecommunications. Driven by advances in artificial intelligence, digitalization and robotics, the productivity of China's entire industrial sector will also increase by leaps and bounds.
Analysts point out that the success of Chinese companies in the global South is not accidental. On the one hand, China's sustained rapid economic development provides strong support for companies, and the country's sound industrial chain and supply chain system enable Chinese companies to have advantages in cost control and product quality; on the other hand, Chinese companies are good at perceiving market demand and can quickly adjust their strategies to launch products and services that meet the needs of local consumers.
"The good development of Chinese enterprises in the global South is closely related to the government's policy guidance and the enterprises' own efforts." Song Wei analyzed that under the framework of the "Belt and Road" initiative, China and the global South countries have deeply connected their development strategies, accurately understood the development needs of relevant countries, and then targetedly guided Chinese enterprises to enter relevant fields. In addition, promoting local currency settlement within the BRICS and SCO mechanisms and signing free trade agreements between China and Mauritius, Ecuador and other countries also play an important policy guidance and guarantee role in the business expansion of Chinese enterprises in the global South countries. "In addition to macro-policy guidance, China has also continuously innovated investment and financing models. Engineering project management models such as 'engineering general contracting + financing' provide more attractive financing solutions for developing countries and help Chinese companies better resist risks. At the same time, Chinese companies themselves have competitive advantages in technology, cost and other aspects, and pay attention to legal compliance, actively fulfill their social responsibilities, give back to the local society, provide technical training for the global South countries, create employment opportunities, solve people's livelihood problems, and establish a good corporate image."
Zhou Zhiwei pointed out that the pace of internationalization and globalization of Chinese enterprises is accelerating, providing more diversified sources of investment for the global South. Different from the investment model of developed countries in the past, the investment of Chinese enterprises is based on the industrial needs of the destination countries themselves, adhering to the principle of equal and mutually beneficial cooperation. "In addition, Chinese enterprises go overseas with the successful development experience of Chinese-style modernization, and the global South countries can learn from each other's development experience in economic and trade cooperation with Chinese enterprises. Because of this, Chinese enterprises are generally recognized and welcomed by the global South countries." Zhou Zhiwei said.
Promoting economic development in the Global South
The Economist published an article stating that Chinese companies have established a good reputation in the global South. According to a poll conducted by the Pew Research Center in the United States, many developing countries believe that China plays a positive role as a promoter of their own economic development.
Experts believe that the recognition of Chinese companies and China by the global South countries is closely related to the positive benefits that Chinese companies have brought to local economic and social development.
"At present, there are two core development demands in the global South. One is to accelerate industrialization and modernization, and the other is to seize the opportunities of the new round of industrial revolution and use new technologies to achieve rapid development. The arrival of Chinese companies coincides with the development demands of the global South. On the one hand, Chinese companies participate in the infrastructure construction of the global South, providing an important foundation for their industrialization and modernization; on the other hand, the digital technology innovation practices and experience of Chinese companies provide useful reference for the global South to accelerate the transformation of the digital economy and help them catch the express train of digital economic development." Song Wei said.
Zhou Zhiwei pointed out that Chinese companies are accelerating their layout in the global South, providing more sources of foreign investment for relevant countries, helping to make up for the lack of investment capacity in these countries and providing external impetus for their economic and social development. In addition, the investment of Chinese companies has expanded the space for independent choice of the global South countries. The cooperation form based on the development demands of the global South countries without any political conditions can help developing countries better explore development models that suit their own national conditions.
Hussein Askari also believes that by promoting the joint construction of the Belt and Road Initiative, China is helping the global South countries to achieve industrialization based on their own comparative advantages and gradually get rid of their past roles as exporters of cheap raw materials and importers of expensive industrial products. In the eyes of the global South countries, China is a reliable partner with a long-term development in mind.
In the future, how can Chinese companies better take root and develop in the global South to achieve mutual benefit and win-win results with local partners?
Zhou Zhiwei believes that complementarity is the fundamental driving force of economic and trade cooperation. In the future, China and the global South can further explore the complementarity in resource endowment, industrial structure and other aspects, give play to their respective relative advantages, and create more opportunities for Chinese companies to enter the global South. "In addition, each country has its own development strategy and development demands. China continues to strengthen its connection with the global South in terms of development strategy and market demand, and enhances the level of cooperation in various fields such as trade and investment, which will also promote the healthier and more sustainable development of Chinese companies in the global South."
Song Wei believes that digital economy, green economy, high-tech, and intelligent manufacturing will become important areas for Chinese companies to further expand markets and develop cooperation in the global South. "With the deepening of the Belt and Road Initiative, the intergovernmental cooperation between China and the global South continues to deepen. Chinese companies have broad prospects for development in the global South. More and more Chinese companies will go abroad and inject new vitality into the development of the global South."
Source: People's Daily Overseas Edition
