Can Chinese Companies Succeed Outside China?

Chinese companies are increasingly expanding into international markets. But there is a significant difference between selling products overseas and building a business overseas.

A company can continue to manufacture in China and sell through distributors, logistics partners and local sales organisations. It can establish warehouses, service operations and subsidiaries in overseas markets. It can form a joint venture with a local company, acquire an established business, or eventually build its own production facilities.

Each route creates a different set of challenges. A company exporting from China operates in a very different environment from a Chinese company that has acquired a German manufacturer and inherited its employees, customers, suppliers, and management structures.

The question is therefore not simply whether Chinese companies can compete outside China. It is whether the business model that made them successful in China can continue to work when the company becomes international.

The advantages of operating in China

Chinese companies have spent decades developing some formidable advantages at home. Mature supplier networks, highly developed logistics, large-scale manufacturing capability, experienced workforces and strong industrial clusters all contribute to making production in China extremely competitive.

These advantages do not disappear when a company expands internationally, but they cannot necessarily be reproduced elsewhere.

This matters even when the products themselves continue to be manufactured in China. A Chinese company may have an excellent factory and supply chain at home, but once it starts operating internationally, it needs to build another layer around that manufacturing base. It may need European logistics providers, warehouses, distributors, sales teams, service engineers and local management.

The product is still made in China, but increasingly the business delivering it is not.

I’m not the same person in German

I experience this myself when I try to join a conversation in German. I can follow much of what is being said, but I am not as vocal as I would be in English. By the time I have worked out exactly what I want to say and how I want to say it, the conversation has often moved on.

In some ways, I am not really the same person in German. I am quieter, less spontaneous and certainly less likely to jump into a conversation. Someone judging me only by what they saw in that room could easily form a very different impression of me from someone meeting me in an English-speaking environment.

That experience has made me more conscious of what we may miss when someone is quieter because they are not speaking in their native language.

Different routes create different challenges

An acquisition changes the situation considerably. The Chinese company is not starting from scratch. It acquires an organisation that already has employees, customers, suppliers, processes and established ways of working.

That can be a huge advantage. The company already has a market presence and knows how to operate there. But the new owner also inherits expectations that have developed over many years. Employees may have very different ideas about management, communication, decision-making, and working practices than the new owners.

Joint ventures create another set of challenges. Two companies can agree easily on the commercial opportunity and still discover they have very different ideas about who should make decisions, how information should be shared, how quickly things should happen, and how much autonomy each side should have.

Even a straightforward sales or service operation can create similar issues. Headquarters may expect the local team to move quickly, report frequently and respond immediately, while the local team may expect greater autonomy and work within very different employment practices and customer expectations.

None of this necessarily means that one side is right and the other wrong. They are simply operating with different assumptions.

Holidays and working hours

Some of those differences become very visible in everyday working life.

In Germany, for example, taking two or three weeks of holiday at a time is hardly unusual. There are also clear expectations around working hours, time off and the separation between work and private life. For a manager coming from a very different working environment, that can take some getting used to.

Imagine arriving in Europe as a new Chinese manager and finding that a key member of your team will be unavailable for two weeks because they are on holiday. Then, during those two weeks, you send an email, and nobody responds because the person who normally handles the issue is away.

From the manager's perspective, particularly if the matter seems urgent, that can be difficult to understand. From the employee's perspective, the answer is straightforward: they are on holiday and are not expected to check their emails.

The same differences can appear in less obvious ways. How early should people arrive? How late should they stay? Is it reasonable to contact someone outside their normal working hours? How quickly should someone answer an email? Does working longer hours demonstrate commitment, or does it suggest that the work has not been organised particularly well?

None of these questions has a universal answer. But they can become surprisingly important when a Chinese company starts operating in Europe. A management team can bring its products, technology and business model into a new market relatively quickly. Changing expectations about how people work is a much slower process.

The challenge goes beyond production

This is why Chinese companies' international expansion is about much more than where they manufacture their products.

Some will continue to produce in China because that remains the most efficient option. Others will establish local production because of market access, logistics, political pressure or customer expectations. Some will use acquisitions or joint ventures as their route into a market.

No single model exists for going global.

What they have in common is that the further a company moves into another market, the more it must operate through people, partners, and organisations that do not necessarily share the assumptions of its headquarters.

A logistics partner does not operate like a Chinese factory. A German subsidiary does not operate like a Chinese business unit. An acquired European company does not suddenly stop being European because its owner is Chinese. And a joint venture is, by definition, a combination of different ways of doing business.

That can create friction, but it can also be an advantage. A Chinese company that learns to combine its own strengths with local knowledge and capabilities may end up with a much stronger international operation than one that simply tries to reproduce its domestic model elsewhere.

From Made in China to Made by China

Perhaps "Made in China" is becoming a rather limited way of describing what is happening.

A Chinese company might manufacture in China, use European logistics partners, sell through a local subsidiary, acquire a German business or establish a joint venture. The product may still be made in China, but the business around it is increasingly international.

The more interesting question is therefore whether the advantages that made a Chinese

company successful at home can travel with it. Some can. Others depend on the particular industrial, economic and business environment that exists in China.

As Chinese companies become more established internationally, we will see different answers to that question. Some will adapt quickly. Others may find that what worked extremely well at home does not transfer quite so easily.

Entering a market is one thing. Becoming part of it is something else.

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Mark Mortimer is the founder of Timezone Business, with over 30 years of experience working in international business across China, Japan, Germany, India, the UK, and the US, and now uses that experience to advise senior professionals navigating the cultural and operational challenges of cross-border business.