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Exploring Belt and Road Opportunities
Localization helps a Chinese SOE make inroads into overseas markets
By Deng Yaqing | NO. 2 JANUARY 12, 2017

 

A sketch of the W-Hotel, an MCC Overseas project, in Kuala Lumpur, Malaysia 

Gao Fei, a Chinese engineer with a 3-year-old daughter, had been working for the Malaysia-based subsidiary of the Metallurgical Corp. of China (MCC), a Chinese state-owned enterprise (SOE), for nearly three years.

"When I left China to work in Kuala Lumpur, my daughter was just 2 months old. Now that I am back, I am like a stranger to her because I have missed many important stages in her growing up process," Gao said.

Gao often regrets his failure to be with his family in China because of his work. Like him, there are millions of Chinese professionals who have given up their traditional domestic lives to serve SOEs' overseas projects.

Expanding overseas markets 

Since President Xi Jinping put forward the Silk Road Economic Belt and the 21st-Century Maritime Silk Road (Belt and Road) Initiative in 2013, centrally administered SOEs have laid an emphasis on countries along the Belt and Road, which are home to 4.4 billion people, 63 percent of the world's total, with their economic aggregate hitting $21 trillion, 29 percent of the global total.

By the end of 2014, more than 100 such SOEs had set up over 8,500 overseas branches in roughly 150 countries and regions. Over 80 had established subsidiaries in countries along the Belt and Road, according to a Belt and Road roadmap for Chinese enterprises released by the State-Owned Assets Supervision and Administration Commission of the State Council in July 2016.

As globalization and regional integration progresses, many Chinese SOEs have set out to find new opportunities. In pursuit of global development, MCC established a wholly owned subsidiary, MCC Overseas Ltd., which has now grown into a project management and service company.

"Transforming from entirely depending on the export of labor services to giving full play to innovation and capital advantages, the company is now capable of providing comprehensive and customized solutions for construction projects in the overseas market," said Zou Weimin, President of MCC Overseas.

After a decade of mushrooming growth, MCC Overseas opened offices in more than a dozen countries, including the United States, Thailand, Australia and Russia. Its business today extends into more than 30 countries and regions. In 2015, the company saw its new contracts totaling 10.5 billion yuan ($1.51 billion), up 155 percent from 2014.

Recipe for success 

Under the Belt and Road Initiative, large SOEs should grasp the opportunity to expand in overseas markets and achieve win-win results, State Councilor Wang Yong said.

According to Wang, SOEs should try to grow first-class brands through high standards and quality, strengthen localized management by fostering international professionals, and put work safety first.

Wang also said that in the process of going abroad, enterprises should ensure their contribution to local economic and social development, employment and environmental protection. They should also build infrastructure.

The Malaysian branch of MCC Overseas, for example, has over 560 workers; 328 of them, or 58 percent, are locals.

While seeking development in the international market, what matters most is to understand project owners' requirements and demands and help them solve problems, Zou said.

In Kuala Lumpur, MCC Overseas is building the W-Hotel, a five-star hotel next to the Petronas Twin Towers, the world's tallest twin towers. The hotel is expected to become another landmark in the capital. This is a key project in MCC Overseas' endeavors to answer the Belt and Road Initiative; the building is 273 meters high with a construction area of 85,000 square meters.

"When we called for bids for this project, many well-known local companies and contractors from South Korea and Singapore jockeyed for it but we chose MCC Overseas," said Lin Yicong, representative of Tropicana Corp., owner of the W-Hotel project.

Lin said MCC Overseas was chosen because of their ability to adapt to local culture, cooperative attitude to meet requirements and strong team spirit.

"[Also, as] the local enterprises in this trade are relatively small and local labor force insufficient, MCC Overseas can better satisfy the demands of big projects like W-Hotel by dint of labor resources and abundant management personnel," said Yang Ruobing, General Manager of the Malaysian subsidiary of MCC Overseas.

Besides the W-Hotel, MCC Overseas is also building a 3.5-million-metric-ton steel plant in the Malaysia-China Kuantan Industrial Park in Pahang, Malaysia's third largest state. "We aim to build it into the most modernized steel plant with the most abundant product lines in Southeast Asia," Yang said.

In Indonesia, the Cileunyi-Sumedang-Dawuan toll road is MCC's first government loan-supported project in the country. On completion, it will be the country's first expressway tunnel.

Zou said to smoothen the way to the global market, Chinese enterprises should discover and build their core competitiveness.

They should learn the advantages they need to acquire—an ability to coordinate and integrate resources, learn fast and innovate their business models, Zou suggested.

Copyedited by Sudeshna Sarkar 

Comments to dengyaqing@bjreview.com  

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