July 24, 2017
View from Beijing: Why companies need to ‘Think China’ first and ‘Think global’ second when communicating around the Belt and Road Initiative
The Belt and Road Initiative (BRI) is one of China’s greatest international economic endeavours; however the exact concept still causes some confusion in the West. So how do domestic and foreign businesses talk about their strategies for tapping into the Belt and Road Initiative?
In May 2017, China hosted 28 heads of state and government at the Belt and Road Forum for International Cooperation to discuss President Xi Jinping’s signature foreign policy initiative. Since then, companies inside and outside of China have been working out how to successfully communicate their commitment and strategy around this extraordinary economic development opportunity.
The BRI, which was launched in 2013, started as an idea to reconnect the East and West through the modern-day Silk Road Economic Belt and the 21st Century Maritime Silk Road (collectively referred to as Belt and Road). It aims to unlock vast investment opportunities, especially in terms of financing transformative infrastructure projects along the Belt and Road, and is seen as a key component of its economic development plan to “open up” China to the rest of the world.
The Financial Times in May this year estimated that there were already $900 billion of planned investments ranging from ports in Pakistan and Sri Lanka to high-speed railways in East Africa to gas pipelines crossing central Asia. This makes the Belt and Road Initiative the largest overseas investment drive ever launched by a single country.
Chinese government policy is being directed towards the success of BRI
In China, there is an overwhelming sense of optimism towards the BRI and the role that China can play under the current administration in leading the efforts to promote global interconnectivity and infrastructure construction. The national blueprint, which took time to put together given China’s careful considerations of the driving forces, can only be supported by the business activities of individual companies.
The Chinese government is encouraging Chinese enterprises to participate in infrastructure projects and establish local operations across Belt and Road countries. Experts say that China is consolidating all the development strategies into this overarching one; even Made in China 2025, the national plan designed to transform China to a world leading manufacturing power.
The agenda is also moving in a favourable direction for foreign businesses as the authorities try to ease market access for foreign capital. The state leaders of China have emphasized at various important international occasions that “opening up” is one of the key strategies for China’s economic development. At a speech delivered at the China-Germany Forum: Shaping Innovation Together in June, China’s Premier, Li Keqiang, emphasized the importance of promoting mutual openness to create a more friendly and fair environment for bilateral cooperation.
Every effort is being made domestically to support this initiative. In addition to the $40 billion capital injection to set up the Silk Road Fund, China will scale up its investment in the BRI by contributing an additional 100 billion yuan (about $14.5 billion) to the Silk Road Fund. China is also encouraging financial institutions to conduct overseas RMB fund business with an estimated amount of about 300 billion yuan (about $43.5 billion), among many other financial structures.
Demonstrating your value is key
For Chinese businesses looking to use the BRI to expand overseas, alignment with the key national strategy is less risky in terms of gaining regulatory approval for deals – particularly in the face of increasing government scrutiny to counter suspicious capital outflow. It is important for Chinese companies, especially state owned enterprises, to set out the rationale for their investments, dispel any misconceptions that this is a politically driven deal and set what the overall benefits will be for the local environment and community.
In more developed regions like Europe, Chinese companies often find themselves struggling to tell a strong and compelling corporate story addressing the scepticism about who they are and the investment rationale, especially against the tougher scrutiny in the continental Europe towards foreign investment in the strategic sectors. It is even more difficult when these companies don’t have trained senior executives on the ground as spokespeople.
Multinational corporations that wish to enter or expand existing operations in China should be aware that China is a unique market that it is still tightly regulated. To engage with key stakeholders, including regulators, a company must have a clear corporate story to tell and it should be one that is aligned with the development goals of China. International companies must closely tie their business activities with the market environment, paying attention to common sentiments communicated by regulators and debated in the media.
Despite the international nature of the BRI, this initiative is very much one that is being championed and led by the current Chinese government. For this reason, it is very important for companies wishing to tap into the investment opportunity along the Belt and Road to communicate clearly and help ensure that both external and internal stakeholder groups in China recognise the benefits of an investment, whether it is a domestic acquisition overseas (e.g., HNA’s investment in Deutsche Bank and Frankfurt Hahn Airport) or foreign businesses fulfilling financing needs (e.g., China calls for public-private partnership for Belt and Road projects).