High labor costs, political risks, rising populism and cultural differences are the major challenges Chinese companies face when investing overseas, says Zhang Ming, a senior researcher at the Institute of World Economics and Politics under the Chinese Academy of Social Sciences, who cites a study by the institute’s department of international investment research.
The study found Chinese companies have trouble adapting to cultures that protect the rights of workers more strongly, with higher labor costs and more complicated employment systems. Chinese investors are also exposed to political risks where an unpredictable political environment can result in inconsistent policies. Rising populism and protectionism, as well as notable differences in business and governance, are also to blame for Chinese companies' unsuccessful forays overseas.
Zhang says the Chinese government should expedite negotiations with the European Union over a bilateral investment treaty in order to protect the overseas rights of Chinese investors. As for companies, the article says they should work with influential local partners or credible third parties to reduce any likely resistance from local people. Another way for Chinese companies to blend into local communities is to take their social responsibilities seriously, Zhang said.
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