"In brief, we should take a rational view of China's overseas investment in agriculture. In spite of its large population, China can guarantee its grain supply through technology. I think that by encouraging Chinese agricultural enterprises to go global China is in a sense endeavoring to strengthen its agricultural sector by pitting these enterprises against international competitors, so making them an international force. The essence of the 'going global' strategy for Chinese agriculture is that it will contribute to world agricultural development," He concluded.

SOE Autonomy

China's state-owned enterprises (SOEs) have been under discussion among observers within the world community of these companies' forays abroad. The general opinion is that the Chinese government's manipulations of SOEs have quashed many of their potential acquisitions.

"Foreign observers usually have scant understanding of China's administration system. They labor under the misconception that SOEs abroad are controlled and financially supported by China's government. This is not the case. The government neither manipulates nor allocates funds to them," He told China Today.

When examining and approving overseas investment projects, the National Development and Reform Commission (NDRC) raises suggestions with respect to the investment orientation to ensure investment safety, according to He. For example, approving authorities will not advise enterprises to invest in countries that are embroiled in wars. But as to whether or not an investment will be profitable, this is left entirely to the enterprise concerned to decide, according to He.

The NDRC checks the source of investment capital and an enterprise's bank credit. Unless the bank is willing to issue letters of guarantee for loans to an enterprise, the NDRC will not approve that enterprise's proposed overseas investment project.

Some overseas China watchers believe that the Chinese government is the source of SOE investment, as their loans are mainly obtained from stated-owned banks. As He explained, "State-owned banks are also enterprises whose loans must be repaid because they are not government appropriations. A bad loan, in the case of an investment going sour, means that the bank will suffer." To avoid risks, therefore, banks make financial audits of enterprises to ensure their repayment capability prior to granting loans.

Although China's SOEs took the lead in the "going global" campaign, China's private enterprises are adding robust momentum to it. In 2011, the proportion of private enterprises among the total undertaking overseas investment was around 35 percent. In 2012, the proportion rose to 40 percent.

"China's government has repeatedly stressed its willingness to support private enterprises that go global. I personally think that private enterprises will become the main force of China's overseas investment, and that this is an irresistible trend," He said. "As for the rapid increase of the private share in China's overseas investment, I think this can be attributed to their flexible mechanisms and quick decision-making. These are the strengths of private companies, as there is no need to obtain approval at various levels. Sometimes, all that is needed is a decision by the chairman of the board."

Greater Localization

Criticism abroad of China's enterprises with regards to corporate social responsibility has been vociferous. It includes charges that such enterprises bring Chinese workers with them rather than hiring local ones; also that they have failed to protect the local environment and made scant contributions to local communities.

"This might be true of some enterprises in the past," He said, going on to explain that this could be ascribed to Chinese enterprises being new to the international arena. There are some Chinese entrepreneurs that indeed run their business abroad with a fixed Chinese-style mindset and management mode.

"In the past, private enterprises often took their Chinese workers abroad with them. When asked why, their response would be that Chinese workers are the world's most industrious, and that in addition to being highly efficient, they are prepared to work overtime, endure hardship and survive tough environments," He said. From an economic perspective, this practice is seemingly defensible. But if investment is made overseas, it should include employing locals. As employment brings stability, creating more jobs is of even greater social significance than making donations towards building kindergartens and primary schools in the destination countries.

Aware of the importance of corporate social responsibility, the theme of the 5th China Overseas Investment Fair held last December was "Responsibility, Investment and Cooperation."

"To make a successful investment, it is vital to take corporate social responsibility into account. I don't have accurate statistical data to hand, but based on my tracking of enterprises that are going global I find many of them are changing. They frame their localization policy and hire more local workers," He said. After acquiring Volvo, Geely did not send a single Chinese employee to Sweden, instead hiring more than 1,200 locals. The company's original intention was to run its overseas business with Volvo's original staff. More and more Chinese enterprises are acknowledging their social responsibilities abroad by building kindergartens, hospitals and schools as well as contributing to the construction of local infrastructure.

In 2012 Chinese overseas enterprises hired more than 700,000 local employees. Tax paid to destination countries that year exceeded US $22 billion, according to official data.

"After all, our enterprises have been going global for only a short period. We need time to learn and adapt to local communities. The outside world should take into consideration the time these enterprises need to integrate with local communities rather than stereotyping them based on isolated instances," He said.

The Facts of the Matter

Since the outbreak of the world financial crisis, world opinions on Chinese investment have been mixed. On one hand, media reports have repeatedly stated that the world welcomes China's money; on the other, it is clear that world media delight in reporting on rejections of overseas investment by Chinese enterprises on the pretext of national security.

"There are restrictions on Chinese investment in some countries. For example, the U.S. turned down Chinese investment for reasons of national security. Huawei and Sany Heavy Industry have both encountered the same dilemma," He said. These cases have entailed the involvement of many interest groups, including Congress and lobbying groups. "We are capable of identifying our own problems, notably a lack of awareness of our image as regards outbound investment. The inappropriate behavior of certain Chinese enterprises has damaged the overall standing of Chinese enterprises abroad," He said. It is imperative, therefore, that Chinese enterprises investing overseas abide by local laws. This will help build a good reputation.

"Encountering different concepts, practices and traditions is inevitable when investing in other countries. You can't change them, but you can change yourself by standardizing and promoting your enterprise in ways that dispel other people's misgivings. If the destination country declines your investment for reasons of national security, you can leave governments to deal with the matter, because it is a government-level issue," He said.

The U.S. turning down Chinese investment on the grounds of national security is definitely the exception rather than the rule. The media sensation it causes can be ascribed to the reporting biases of foreign media that tend to exaggerate certain issues with the intent of smearing Chinese enterprises. On the other hand, certain domestic media also overreact to such instances.

"I don't agree that failed Chinese overseas investment ventures outnumber those that succeed," He said. He holds that media should be objective in their reports, and size up Chinese investment holistically rather than exaggerating problems in a way that displays an overt bias against China.

(Source: China Today)