With their domestic profits shrinking and production capacity expanding, Chinese companies continue to expand their footprints abroad in search of new and more profitable markets. In this serieswe explore the next phase of China Inc. of “going global” and the complex, challenging global environment that its companies have chosen to enter.
Not long ago, plans were underway to build a large battery factory in the Belgian countryside. When completed, it would create around 2,000 jobs for the local economy and serve as a hub for the Chinese company expanding into the European market.
But the project is now in controversy – not due to geopolitical tensions or the trade dispute between Beijing and Brussels, but it is a simple misunderstanding. The Chinese company only recently discovered that wages in Belgium are linked to inflation, an added cost that was not accounted for in its original feasibility study.
The firm, which has not been named due to the sensitivity of the matter, may have made a mistake by trying to cut corners: it did not hire a law firm to do a proper report, according to Xiufang Tu, partner and head of the China desk at Brussels-based law firm Daldewolf.
Instead of commissioning a full investigation, many Chinese companies simply set up meetings with a chain of European legal firms and then put together a basic feasibility report from the pieces of information they gather, Tu said.
“After that, once the leadership signs, a decision is made,” he said. “But in this case, the information you collect — if you don’t pay for it — is very basic and superficial.”
This gung-ho approach to legal services is becoming a big problem for Chinese companies rush to go international. A wave of Chinese companies expands into Europe – seek refuge from the war on bad prices and poor demand at home – and their first instinct is often to use the playbook that worked in China.
