Thorough planning aids firms' success abroad

Chinese company booths attract visitors at an IT exhibition in Hanover, Germany last month. Xinhua

Successful Chinese companies usually have a thorough plan based on the realities of their own business and their industry before expanding internationally, said Eugene Qian, head of China global banking of Citibank (China) Co Ltd.

Although many Chinese business are venturing abroad, only a few are truly successful.

Those who succeed are companies with a clear vision of their medium- and long-term development strategy. They know what they really want from overseas investment.

"Company executives should ask themselves before making an overseas acquisition, 'Do we want the international market, the strategic presence at home and abroad during the process of globalization of our industries, or diversification of our investments to reduce the risk?'" he said.

He suggested that corporate leaders must analyze carefully whether a proposed investment is in line with the company's development strategy and whether they can bear the risks involved when they are looking for a target country, industry or company.

"You have to count your ammunition before developing a business overseas, "Qian said. "It needs to be clear that you will receive support from the government, trade associations or your banking partners."

Even if a company has enough capital for an acquisition, it needs to remain flexible and be prepared to increase the price if other buyers emerge.

Senior executives also have to think about how much more they'll have to spend following an overseas acquisition, many of which require ongoing funding.

"A good banking institution is a trusted adviser of its clients. The bank will think ahead and forecast clients' demand with a thorough understanding of their development strategies," he said.

"It knows whether clients should expand their business segments and geographic reach, where they should go based on country risk assessments, where their major global competitors are and in which areas they will have major capital expenditures in the next few years," Qian said.

Citibank China has found it useful to share the experience of other multinational enterprises going global with its Chinese clients to help them identify their own strengths and weaknesses and determine the direction of their next steps.

After more than 10 years of overseas expansion by large State-owned enterprises, especially those specializing in natural resources and advanced manufacturing, leading private companies such as Dalian Wanda Group Corp Ltd and Shanghai-based Fosun International Ltd are also moving to expand their geographic reach.

In East China, even some lesser-known, medium-sized private companies have established branches in overseas markets where they've been doing business. Some companies are using Singapore or Hong Kong as their overseas treasury and export centers.

After serving leading Chinese companies for nearly 20 years in their overseas investment and expansions, Citibank China started seeking out and fostering more promising private enterprises several years ago.

The bank has set up China Desks in Hong Kong, Singapore, London, New York, Dubai and other cities to provide on-the-ground financial support to the overseas operations of Chinese companies.

Apart from giving companies suggestions on investment projects and strategy, the bank also helps them implement ideas, raise capital, integrate with target companies and manage financial risks after acquisitions.

"More Chinese companies will venture overseas," said Qian. "We will keep cultivating high-growth emerging market champions mainly in fields such as industrial manufacturing, natural resources and consumer products."