A new perspective for global companies in China

Lately, I joined a seminar on corporate communications and government relations. At the event, representatives from multinational companies discussed their headquarters considering China, particularly Shanghai, for future investments, but no concrete decisions were made.

During the discussions, a common theme was the need for autonomy among Chinese teams in multinational companies. The attendees also stressed the importance of earning trust from headquarters to access more funding and resources for the local market.

The buzzword everyone's talking about is "authorization," but interpretations vary.

On one hand, some multinational companies have either adopted or are gearing up to establish China as a standalone business unit. On top of geopolitical and supply chain security concerns, this move is also driven by the vast scale of the Chinese market.

On the other, Chinese teams within some companies are crafting tailored development strategies for the local market. These strategies leverage digital tech, focus on product, supply chain, and marketing innovations, culminating in what's dubbed the "China Plan."

Yet, many challenges persist.

Within the internal framework of many multinational companies, European and American regional teams hold sway, making it arduous for Chinese teams to secure full authorization.

Moreover, establishing innovative ventures in China demands substantial investments with uncertain returns, leaving multinational headquarters hesitant about settling in China due to prolonged investment cycles and high capital requirements.

During the seminar, drawing from my extensive experience collaborating with multinational firms in China, I shared several insights.

Firstly, garnering support from the board of directors and management at the multinational headquarters is crucial for the China team's success.

In recent years, many multinational companies increasing their investments in China have executives with significant China experience. Some have worked in the region for over a decade. This firsthand experience equips them with a nuanced understanding of China's landscape and the critical factors impacting investment projects, along with adeptness in collaborating with local stakeholders.

Furthermore, several global presidents of multinational companies have made multiple visits to China this year, engaging positively with the government, partners, and consumers. These interactions have deepened their understanding of China's emerging industries and laid the groundwork for future investment endeavors.

Secondly, to gain trust and support from headquarters, Chinese teams must prioritize business development. When a new business shows extensive market potential and promises significant global profits, multinational headquarters naturally offer robust backing.

To achieve this, some Chinese teams within multinational firms are intensifying their efforts. They're not only innovating internally but also collaborating with Chinese entities like companies, universities, and third-party institutions for open innovation.

Furthermore, some multinational companies have established global incubators in Shanghai, partnering with local startups to explore innovative business models and products for both domestic and international markets.

In sectors such as electric vehicles, energy-efficient materials, and consumer electronics, this open collaboration in the Chinese market presents promising prospects.

Finally, for Chinese teams in multinational enterprises to gain full authorization from global headquarters, they must establish tailored operating rules suited to the Chinese market.

Recently, I've observed some multinational companies developing specific objectives and ambitions for the Chinese market. These align with headquarters' goals while acknowledging the market's unique characteristics.

Moreover, with China issuing regulations on foreign investment, data management, and digital transformation, Chinese teams in multinational firms must swiftly respond. They should interpret the potential impacts and opportunities for China's business to headquarters and formulate operating rules in compliance with regulations, ensuring future development opportunities are seized upon.

Overall, Chinese teams in multinational companies must actively pursue full authorization from global headquarters, despite the challenges. It's also time to reconsider and redefine "in China, for China."

Easy gains are a thing of the past. Multinationals need a nuanced strategy focusing on long-term bottom line growth. Whether acknowledged or not, most major global companies can't overlook China, despite internal and external geopolitical pressures.

The author, formerly with Shanghai Daily, is an adjunct research fellow at the Center for Global Public Opinion of China, Shanghai International Studies University, and founding partner of 3am Consulting, a specialist in global communications.