Chinese companies need to enhance their understanding of compliance if they want to evolve on their path to becoming truly global companies.
That’s the view of Qin Shuo, observer in the fields of humanities and finance and founder of popular weblog [email protected], who used his keynote address at the first CBLJ Forum in Beijing to coach hundreds of corporate counsel present, and a live website audience of close to 100,000, on transcending beyond China’s borders.
Qin, who is also a founder of the Commercial Civilization Research Centre of China, pointed out that more and more professionals in economic circles have realized that a healthy and sustainable market economy must be governed by law.
He said that the traditional development mode of China, which mainly relies on government and a state-owned economy to allocate resources, is of low efficiency and cannot continue against a background of China’s “economic new normal”. Globally speaking, China is faced with challenges posed by both globalization and deglobalization. However, no matter whether we think from a domestic or an international perspective, frameworks and rules that can dramatically reduce subjective arbitrariness are crucial to China.
Qin gave two suggestions based on China’s current domestic situation. The first one is to further increase additional financial resources. He used Chinese internet companies’ going public overseas as an example, pointing out that the traditional way of resource allocation in China cannot promote the development of an innovation-driven economy, and that the science and technology innovation board may be able to change the situation.
The second suggestion is to optimize existing financial resources. Qin believed that the traditional method of asset allocation should be eliminated and asset management should be turned into capital management. He said that laws could play a bigger role only by using a market-oriented method of resource allocation.
As for the global economic environment, Qin focused on the Sino-US trade negotiations. In his view, the focus of the negotiations had transitioned from trade surplus to the fundamental structure of trade. He said a high level of openness is also important, and such openness can be shown in two aspects, i.e., “going global” and “bringing in”.
He said China’s “bringing in” strategy had entered a stage where wholly foreign-funded enterprises can be established on all fronts, and that the future direction of China’s “going global” strategy should be establishing global companies that can allocate resources all over the globe.
However, he also indicated that companies should keep enhancing their understanding, awareness and application of compliance in the international community.
Based on his survey conducted overseas, he concluded that although Chinese companies have made impressive progress in terms of going global, they would encounter many challenges and risks, including political and legal, and conflicts triggered by cultural differences.
“The other side of risks is global opportunities for Chinese companies,” said Qin, “[Chinese companies] should think in global terms to create global enterprises.”
After the speech, he told China Business Law Journal that it would take Chinese enterprises just three years to outnumber those of the largest scale in the US, while it would take 20 to 30 years for them to build up a globally recognized brand.
“The proportion of international business to the entire business of a Chinese company is still low … [but] you have to integrate into the world.” he said. “At that point, you have to act in strict compliance with the international practices.”