56 Business TheEconomistJuly17th 2021
And, inverting a decadesold trend of copy
ing Western intellectual property (ip), a
few have become tech powerhouses in
their own right, selling advanced products
to the world.
The scale of China Inc is formidable.
China was the largest investor in the world
in 2020. Foreign direct investment (fdi)
from Chinese firms hit $133bn, down only
slightly from 2019 despite the headwinds
(see chart 1). The country has some 3,400
multinationals, almost as many as Ameri
ca and western Europe combined, reckons
Bain, a consultancy. Around 360 big listed
Chinese groups report foreign revenues.
These amounted to around $700bn in
2020, compared with 250 large firms earn
ing a total of $400bn in 2012, according to
data from Bloomberg (see chart 2). In 2020
Chinese venture capitalists ploughed an
estimated $3.2bn into American startups
in 249 deals, the secondbiggest year on re
cord by value, calculates Rhodium Group, a
research firm. Analysts at cbInsights say
that Chinese investors’ participation in
American venture deals last quarter was
the highest since at least 2016.
The Chinese presence is deep as well as
broad. Last year more than 100 of the listed
firms earned at least 30% of revenues out
side China; 27 earned 70% or more. All
told, China’s top ten foreign earners
booked $350bn or so in overseas sales. This
total has grown by 10% a year on average
since 2005, Bain says, twice as fast as the
equivalent figure in America, Europe or Ja
pan. Tencent’s foreign sales have risen at
an annual rate of 40% for nearly a decade,
and now make up 7% of its huge top line.
The first plank of China Inc’s new global
strategy is astute localisation. In the past
most Chinese fdiconsisted of asset pur
chases. Last year, by contrast, a lot was re
invested earnings from operations abroad.
Hisense, a maker of consumer electronics,
wants to treble its overseas sales, from
$7.9bn in 2020 to $23.5bn in 2025, half its
projected total, says Candy Pang, its head
of marketing. That would leave a lot of
money to spend on foreign factories, re
search and development, and marketing (it
is sponsoring the 2022 football World Cup
in Qatar, among other sports events).
Chinese firms have also retained their
subsidiaries’ foreign leadership. Despite
recently merging with another state
backed giant, ChemChina has allowed its
foreign assets to operate as global compa
nies. Pirelli, which it bought in 2015 for
€7.1bn ($7.6bn), still makes tyres in Italy.
Syngenta, for which it paid $43bn a year
later, maintains a Swiss headquarters, a
mostly foreign executive team, and a nine
person board with only two Chinese state
officials.Similarly, Geely has allowed for
eigners to run Volvo, and Haier, an appli
ancemaker, kept most of geAppliances’
top brass after acquiring the Americanfirm.“Youcan belongto Chinawithout
havinga Chinesedominatedboard,”says
anexecutiveatoneChinesemultinational.
ThesecondpillarofChinaInc’snew
globalisation strategy is to shun mega
dealsinfavourofsmallerones.Thespecu
lativewaveofoutboundinvestmentsbe
tween 2015 and 2017 swallowedup$425bn
in assetsandraised plenty ofeyebrows
among foreign and Chinese regulators
alike. By contrast, of the 235 outbound
transactions sofar this yearonly three
werevaluedatmorethan$1bn.
ThemasterofminidealmakingisTen
cent.Ithasmadeatleast 85 crossborder
investmentssincethestartof2019,accord
ingtoRefinitiv,a dataprovider.Manyof
thesearesmallstakestakenaspartofa
larger consortium of investors that in
cludes prominent nonChinese private
equitygroups.Thisyear,forexample,Ten
centboughta 4%stakeinRakuten,a Japa
nese internetgroup, forabout$600m—
small change for a giant worth nearly
$700bn.Ithasalsocontinuedtoinvestin
America,withatleast 12 dealsoverthepast
twoandahalfyears, includingthepur
chaseofa $150mstakeinReddit,anAmer
icanonlineplatformwhichhostspopular
discussionforums.
Chinesecompanies aremaking their
globalpresencefeltinonelastway.Ratherthanswoopinginto foreigncountries to
buyuptechnology,orcopyingWesternip,
theyaregoingouttoselltheirown,says
BagrinAngelovofcicc, a Beijingbasedin
vestmentbank.BecauseChinesesubsidies
tomakersofelectriccarsandbatteriesre
quirethemto ownsomeofthecoreip,
companiessuchasbyd,catl, Gangfeng
andsVoltracedtodevelopit.Havingdone
so,theyarenowtargetingexportmarkets.
bydandsVoltaresettingupfactoriesin
Europe.Soiscatl, whichinDecemberalso
announcedplanstobuilda $5bnoneinIn
donesia(SeeSchumpeter).
BeiDou,China’sstateownedanswerto
America’sgpssatellitenavigationsystem,
wasusedbymorethan 100 countriesin
2020,accordingtoey, a consultancy.Chi
nesetelecommunications services cover
morethan 170 countrieswitha population
of 3bn people. Regardless of American
sanctions, Huawei remains a popular
choicefor 5 gnetworkseveninpartsofEu
rope. HorizonRobotics, which develops
selfdriving systems, counts Germany’s
VolkswagenandBoschamongitspartners.
AndnewChinesestarsarerisingallthe
time. Few fashionistas probably realise
thanShein,a fastfashiondarlingbeloved
ofthehipTikTokset,isChinese.Thecom
panyboaststhetopshoppingappin 50
countries—including America, where it
wasdownloaded onmore iPhonesthan
AmazoninJune.OneConnect,a financial
technologyplatformownedbyPingAn,a
biginsurer,issellinga numberofdigital
bankingproductsdevelopedforChinato
banks and other firms across Asia and
beyond.Itrecentlydesignedanartificial
intelligencefraudpreventionsystemfora
SriLankanlender.
These subtle corporate conquerors
couldstillbestymied—bytheheavyhand
ofChina’sCommunistrulersorAmerica
anditsallies,whichareboundtokeepan
everbeadier eyeonChinesecommercial
incursions.ThegogettingChinesemulti
nationalswouldthenneedtoadaptonce
again.Theyhaveshownthemselvestobe
morethancapableofdoingso.nQuietconquests
ChinaSource:Bloomberg *Withmarketcapitalisationover$5bnandreportingoverseasrevenue †AtJuly 12th 2021225
20
15
10
5
01.0
0.8
0.6
0.4
0.
0
20191817161514132012Listedfirms*
Overseasrevenues,$trn %oftotal†10075502504003002001000
2120191817161514132012Overseas mergers & acquisitions
Announceddeals,$bn % completed†Stable stakes
Outward foreign-direct-investment flows, $bnSource: UNCTAD1250200150100500-50201 2020BritainGermanyUnited
StatesJapanChina