Crossing an Equal Ocean: How Chinese Companies Can Expand Abroad in a Fractured World
Some lessons for the next Trump era: Maybe try Mexico instead?
The rules of globalization are being rewritten. For years, the playbook for Chinese companies venturing abroad was straightforward: scale up, leverage cost advantages, and tap into a seamless global marketplace. But those days are over. The global economy is no longer an open playing field—it’s a fragmented, contentious patchwork of regional alliances and political fault lines. Navigating these shifting dynamics is now the defining challenge for Chinese companies, especially those in the beleaguered digital space. Where do things stand with just over a week to go before Trump 2.0?
Among the attendees of the GoGlobal Forum 2024, hosted by EqualOcean in Shanghai last month, this challenge was front and center. The forum, which brought together business leaders, investors, and policy analysts, tackled the big question: how can Chinese companies thrive in an era where geopolitical risk is as inevitable as it is unpredictable?
From Globalization to Regionalization
The era of "hyper-globalization," where goods and ideas flowed freely across borders, has given way to something far more constrained. Trade blocs like the CPTPP and RCEP, along with initiatives from BRICS (or whatever the acronym is now), are carving out regional spheres of influence. Meanwhile, the U.S. is reshaping its own trade policies, creating a system designed not for efficiency but for security—prioritizing alliances with "friendly" nations and restricting access to critical technologies.
For Chinese companies, this new world order demands a shift in mindset. The idea of a singular global strategy is obsolete. Instead, success lies in understanding and adapting to the unique rules of each region. A case in point is Latin America, particularly Mexico.
The Opportunity in Mexico
Mexico represents a strategic beachhead for Chinese firms looking to enter North America. It’s close to the U.S., boasts a strong manufacturing base, and operates within the framework of the USMCA. But these advantages come with caveats. Trade policies are in flux, and regional dynamics are often unpredictable. Companies must navigate a complex web of local regulations and workforce challenges.
Speakers stressed the importance of localized globalization - a concept cribbed from a 2019 report from McKinsey - that emphasizes integrating into local markets while retaining global ambitions. It’s a balancing act, and getting it right is essential for companies aiming to establish trust and credibility in foreign markets.
The Resilience Playbook
One of the most compelling discussions at the forum centered on how companies can build resilience in the face of geopolitical risks. The speakers outlined a framework that includes five key pillars:
Flexibility in Business Models: Supply chains must be agile enough to withstand disruptions.
Reputation Management: In a world of increasing scrutiny, maintaining a positive corporate image is non-negotiable.
Regulatory Savvy: Understanding and adhering to local rules is critical for avoiding operational hiccups.
Technological Investment: From automation to data analytics, technology is a crucial tool for navigating complexity.
Financial Foresight: Companies need to prepare for currency volatility, sanctions, and shifting trade tariffs.
This decentralization - how companies can move from centralized to decentralized and distributed operational models - is key to building the kind of flexibility needed to weather geopolitical storms.
What the U.S.-China Relationship Means for Business
It’s impossible to talk about geopolitics without addressing the elephant in the room: the strained relationship between the U.S. and China. Policies under both Biden and Trump have profoundly impacted Chinese companies operating internationally.
The Biden administration’s Inflation Reduction Act, for example, effectively penalizes electric vehicles that use Chinese-made batteries by excluding them from subsidies. Similarly, the “small yard, high fence” approach focuses on safeguarding critical technologies and resources. These measures, though not explicitly anti-China, create significant challenges for Chinese firms. And with the imminent return of Trump to the White House, the stakes are about to rise further.
The takeaway? Companies need to monitor these developments closely and adapt proactively. This isn’t just about reacting to policies—it’s about anticipating them.
Collaboration Over Conquest
What stood out most at the forum wasn’t just the analysis but the tone of the conversation. One attendee, a global marklet analyst at Oppo, told me it was eye-opening to see geopolitical conditions framed as opportunities for collaboration and cooperation, rather than the "conquest" mindset that typically characterizes Chinese firms' overseas expansion plans. Instead of treating international markets as arenas for domination, the emphasis was on integration—working with local stakeholders, adapting to regional nuances, and finding mutually beneficial paths forward.
From Efficiency to Security
Another recurring theme was the shift in global priorities. The old trade orthodoxy—maximize efficiency, lower costs, and scale production—has been overtaken by a new mantra: prioritize security and resilience. This shift has reshaped supply chains and trade relationships. Nearshoring, friendshoring, and even "ally-shoring" have become the strategies of choice for many nations.
For Chinese companies, this means aligning their strategies with the realities of a fractured global economy. It’s not enough to have a great product or competitive pricing—success now depends on understanding the geopolitical undercurrents shaping the markets they enter.
The Way Forward
Cautious optimism is key. After all, how can things be worse than they already are? The challenges are real, but so are the opportunities. I heard a Chinese proverb from Li Bai invoked more than once: “长风破浪会有时”—“Long winds and breaking waves will eventually lead to success.” Yes, the waves are high, and the winds are unpredictable, but with the right tools, businesses can navigate them.
In the end, the message was clear: the path forward isn’t about avoiding risk—it’s about managing it. Companies that can embrace collaboration, build resilience, and adapt to regional dynamics will not only survive in this new global order but thrive.