This article is a phased presentation of the research results of the report, and sorts out stages of the globalization development of Chinese companies. To learn more about the report and participate in the evaluation of "TOP50 GoGlobal Brands in China, 2023", click the link or scan the QR code at the end of this article.
After more than 40 years of trials and hardships since the reform and opening up, Chinese enterprises are becoming more and more deeply integrated into the development process of world economic integration . At present, Chinese brands have entered a new stage of innovation and brand-driven globalization development. Changes in multiple internal and external factors have prompted brands to list overseas globalization as the main line for the next decade.
EqualOcean combines unique research experience and historical industry research experience to propose the "2323 flywheel" model to illustrate the driving factors of the new development of Chinese brand globalization:
"2- The world has entered an era of bipolar parallelism" refers to the fact that the global political and economic structure is gradually shifting to a "parallel era" with China and the United States as the two levels, and part of the "de-globalization" or "decoupling" will continue to occur in the next few decades. As the power gap between China and the US continues to narrow, China has gradually grown into a major country with global leadership, and Chinese brands have ushered in a pivotal historical opportunity for global development.
"3 - The Third Wave of Globalization of Chinese Enterprises" refers to the three leaps and bounds that Chinese enterprises have experienced in the past 40 years since the reform and opening up. The first stage is to realize the export of goods through foreign trade, the second stage is to go global with overseas mergers and acquisitions and the Internet as the symbol of capital and models, while the third stage, that is, the current trend, is brand globalization with innovation and brand as the core.
"2- Two Confidence" emphasizes the cultural self-confidence and technological self-confidence of Chinese enterprises in the process of globalization. The combination of soft and hard power establishes brand perception and cultural identity, and has stronger attractiveness and competitiveness.
"3-Three Searches" expounds that in the process of globalization, Chinese brands look for markets, resources, and recognition outward. As the domestic market becomes more and more involuted, enterprises look outward for growth opportunities, global resource allocation and brand recognition have become the current main demands.
External factors: The world has entered an era of parallel polarization between China and the United States
In recent years, the frequent Black Swan incident around the world has become an important catalyst for accelerating the transformation of the political and economic landscape. The outbreak of the COVID-19 pandemic and the conflict between Russia and Ukraine has undoubtedly had a more far-reaching impact on the world. The intensification of competition and confrontation between China and the United States has spawned concerns about "de-globalization" and "decoupling", and the characteristics of a parallel era of global governance with China and the United States as the two poles are gradually emerging.
China's political and economic influence in the world is gradually increasing. From the political level, the "Go East" policy of Middle Eastern countries and the Brazilian President's visit to China all show that China is playing a more important role in the international political arena. Middle Eastern countries such as Saudi Arabia and UAE have continuously strengthened cooperation with China in various strategic fields such as energy and investment to adapt to the transformation of the global energy structure. The Brazilian president's visit to China in 2023 marks a new height of China's influence in the backyard of the US - Latin America.
Judging from a series of economic data, the global influence and structural importance of China's economy continue to increase. With the deepening of free trade zones, free trade ports, and the "Belt and Road Initiative", China's export growth has continued to hit new highs. The "new three" green and low-carbon products represented by new energy vehicles, lithium batteries, and photovoltaics have become strategic industries with new competitive advantages in China under the wave of international energy structure transformation.
New energy vehicles and related industries have become one of China's important advantageous export products. According to the data of the Federation of Passengers, in 2022, China's automobile exports exceeded 3 million vehicles in the whole year, ranking the second largest automobile exporter in the world. The export of new energy vehicles increased by 131.8% year-on-year to 679,000 vehicles.
According to MIIT data, China's total lithium battery exports in 2022 will be CNY 342.65 billion, a year-on-year increase of 86.7%; China's total lithium battery output value will reach CNY 1.20 trillion, accounting for more than two-thirds of the global market share. At the same time, China's annual exports of photovoltaic products in 2022 exceeded USD 51.20 billion, photovoltaic module exports exceeded 153GW, an increase of 67.8% year-on-year, and the global Market Share reached more than 80%, supporting the growth of domestic and foreign photovoltaic markets and the global demand for new energy.
With the continuous improvement of the status of Chinese enterprises in the global industrial division of labor, Chinese enterprises will likely enter the world's first echelon as an organization. These changes provide new opportunities for Chinese enterprises to deploy globally and build global brands. In the tide of the transformation of the global political and economic structure, China's economic growth and the enhancement of international influence will pave a broad road for Chinese brands to go global.
Internal Factors: The Third Wave of Globalization of Chinese Enterprises
Since the reform and opening up in 1978, China's economy has gradually and deeply integrated into the global economic system. After joining the World Trade Organization in 2001, the Chinese government proposed a "going out" strategy, and the globalization process of Chinese enterprises as the "vanguard" has accelerated significantly.
If we divide the overseas development of Chinese enterprises into three historical stages, we can clearly see the transformation of their development logic and theme. (Details can be reviewed at Preview on Reports | The Evolution of Chinese GoGlobal Companies ) The period from 1978 to 2005 can be summarized as the "commodity export" stage. In this stage, Chinese enterprises relied on cheap production factors to develop "others-centered", that is, to provide OEM and assembly services for international brands, while absorbing advanced production technology and management experience to accumulate capital.
Many have become leading enterprises in various fields, such as white goods brands Midea（美的）, Haier（海尔）, Hisense（海信）, and TCL, audio equipment manufacturer Goertek（歌尔声学）, mobile phone accessories company AAC Technology（瑞声科技）, 3C accessories company Pisen Electronics（品胜电子）, furniture brand Kukahome（顾家家居）, etc. All used to provide OEM services for overseas brands. Due to the late start, Chinese companies at that time did not have brand advantages and premium capabilities.
From 2005 to 2018, it can be called the "capital and model go global" stage. A group of foundry enterprises purchased high-quality assets globally through the capital accumulated in the early stage and the window of opportunity caused by the financial crisis, but they also paid a lot of tuition fees in the integration and application of assets. Taking Wanda Group（万达集团）as an example, Wanda entered the US cinema market through the acquisition of US AMC in 2012. However, due to the asset integration problems caused by frequent mergers and acquisitions , the superimposed cinema ticket prices fell. In 2017, AMC's net loss reached USD 487 million. After 2018, Wanda began to reduce its AMC equity stake and withdrew sadly.
The mobile Internet wave sweeping the world has superimposed engineer dividends and population dividends in China, forming an era of business and investment themes. In the fierce "fight" to stand out not only Tencent（腾讯）, Alibaba（阿里巴巴）, Baidu（百度）, ByteDance（字节跳动） and other giant enterprises, but also a large number of deep-rooted segments, looking for blue ocean products and applications overseas, including Cheetah Mobile（猎豹移动）, Newborn Town（赤子城）, Yalla, SHAREit（茄子快传）, JOYY（欢聚集团）, ELEX（智明星通）, Funplus, Tap4Fun, Lilith（莉莉斯）, miHoYo（米哈游） and so on.
According to the "China Internet Industry Development Trend and Prosperity Index Report" by the China Academy of Information and Communications Technology, in 2018, Tencent and Alibaba entered the top ten market capitalization of listed Internet companies in the world, ranking third and fifth respectively. In the "2018 IOS Application Revenue TOP10" list released by Sensor Tower, Tencent Video（腾讯视频）, iQIYI（爱奇艺）, Kuaishou（快手）, Youku, and QQ five Chinese applications entered the top 10, showing their strong revenue capabilities.
The asset-light and pure online model of the Internet/ mobile Internet determines that Chinese enterprises at this stage are "me-centric", and a large number of start-up companies only need to be equipped with dozens of developers in China, and after a certain degree of Localization, the model that has been verified and established in China can be copied overseas, earning considerable returns at a lower cost.
Since 2018, Chinese enterprises have gradually entered the era of "new globalization". As the cognition and internal strength of a large number of enterprises have gradually reached the level of being in line with international standards and even leading the world, factors such as technology-driven, strong brand power, and Localization have become keywords and major trends for enterprises to go global. Chinese enterprises in this period are no longer just "following" and "learning from", but have begun to play an active and leading role in global competition.
Since 2018, cross-border e-commerce and new consumer brands have attracted much attention in the direction of going overseas. According to the General Administration of Customs, China's cross-border e-commerce exports exceeded USD 20.28 billion in 2022, a year-on-year increase of 52.3%. According to AliExpress research data, it is expected that in the next five years, the e-commerce market outside China may usher in an increase of USD 3 trillion to USD 5 trillion, and Chinese companies are expected to receive nearly half of the growth share. In addition to SHEIN, AUKEY（傲基）, Ziel（致欧）and other star cross-border electricity supplier enterprises, Alibaba's international station, AliExpress（速卖通）, Pinduoduo's（拼多多） TEMU, ByteDance's TikTok are also in depth layout.
The evolution of the retail model has also spawned a number of new consumer brands that are "born and globalized", with key features such as category upgrades, direct connection to consumers, online marketing, and rapid adoption of new products, including POP MART（泡泡玛特）, Chi Forest（元气森林）, Beneunder（蕉下）, HEYTEA（喜茶）, Perfect Diary（完美日记）, etc. With the bursting of a new consumption bubble, most of the brands that have survived "hard" have returned to the essence of consumer retail in their business models, and have increased their focus on the global market in a new round of competition.
At the same time, related industries characterized by new energy, intelligence, and hardware technology have become "stars" in the direction of going overseas, and the "new three items of foreign trade" have strongly driven export data for many consecutive quarters. Leading companies in various sub-sectors such as clothing and textiles, food and catering, and electronic manufacturing have also accelerated their globalization layout, mostly in the form of production capacity output, building independent brands, and building marketing networks, becoming the main force of "go global" in the new era.
At this stage, global brands pay more attention to insights into overseas consumers or customers, and build competitiveness through technological advantages, digitalization, brand concepts and other means. Taking new energy vehicles as an example, since 2021, China's new energy vehicles have entered the fast track of development, leading the world with technology and cost advantages and being favored by overseas markets. By 2022, almost all mainstream auto manufacturers have deployed overseas markets, and have led upstream and downstream to go to sea together.
More than 40 years of exploration and practice have made Chinese enterprises mature in product definition, user insights, enterprise resource management, brand culture and other software and hardware strengths, showing a high degree of Internationalization and specialization. This is the valuable experience accumulated by Chinese enterprises in the process of "going overseas", and it is also a vivid demonstration of China's economic globalization. Chinese enterprises will move towards the development path of "I am one with others".
Deep Factors: Dual Driven by Technical Confidence and Cultural Confidence
Compared with the pioneers, the current Chinese enterprises are more confident in technology and culture, which is the deep driving force for enterprises to go global.
Technological confidence stems from the increasing number of original invention patents and design patents in China. These patents are the expression of enterprise technology investment and accumulation, and also constitute the core competitiveness of enterprises. According to the latest "2022 Global Innovation Index Report" released by the WIPO, China's innovation index has risen from 34th in 2012 to 11th in 2022, steadily improving for 10 consecutive years, and ranking first in the world in the number of valid patents. Huawei（华为） alone owns more than 120,000 patents
China also ranks first in the world in nine sub-indicators including the size of the domestic market and the number of domestic patent applications. At the same time, innovative industrial clusters have ushered in rapid development, with the Greater Bay Area and Beijing ranking 2nd and 3rd among the world's five largest technology clusters respectively.
At the same time, China's supply chain system is far ahead in the world with its agility , integrity and digitization level, providing a solid foundation for Chinese companies to go global. China's manufacturing system is complete, with 41 industrial categories, 207 medium categories and 666 sub-categories. It is the only country in the world that has all industrial categories in the United Nations Industrial Classification.
China's huge market volume is also an important factor in revitalizing the global supply chain. According to a McKinsey research report, among the 186 countries and regions in the world, China has 33 of the largest export destinations and 65 of the largest import sources. Among the top 10 ports in the world in terms of cargo throughput and container throughput, China accounts for 8 and 7 respectively. Taking May 2022 as an example, the average time in port and berthing time of ships in China's container ports were 1.98 days and 1.04 days respectively, which were significantly lower than the average of 3.3 days and 2.4 days of major foreign container terminals. The market size of China's 1.40 billion population and the growth potential of Non-Major Market are important engines for stimulating the vitality of global supply chains.
The cultural self-confidence of enterprises benefits from China's increasing comprehensive national strength, and entrepreneurs with Chinese background and international vision have also formed a positive benchmarking effect. Chinese national brands represented by LI-NING（李宁） and Florasis（花西子） have led a group of Internationalization brands with Chinese elements to convey Chinese culture and Chinese stories to the world through youthful expressions, attracting many overseas users and shaping a globally recognized brand influence.
In addition, China, as a unified large market with a population of 1.4 billion, provides strict challenges and tempering for the development of domestic enterprises' products and brands. Only tested products and brands can adapt to various challenges when they enter the global market. This self-confidence generated by the fusion of technology and culture not only drives Chinese enterprises to continue to develop with high quality in the global market, but also gives them enough strength to meet various challenges in the future.
Direct factors: Looking for markets, resources, and recognition from the world
With China's GDP growth stabilizing , urbanization reaching a certain level , and competition in the domestic market becoming increasingly fierce, Chinese companies are beginning to look more at the international market for new growth opportunities. Enterprises not only look for blue ocean and incremental markets overseas, but also diversify the risks of a single market by deploying in multiple markets and improve the robustness of operations.
In the post- epidemic era , the motivation for Chinese companies to go overseas is even stronger. The rise of the new energy industry further promotes Chinese companies to find more cost-effective resources from a global perspective. Refined Operation on a global scale to improve efficiency and optimize cost structure has become one of the important forms of corporate globalization. Taking the global industrial division of labor in consumer electronics as an example, China focuses on parts supply, Product Research & Development design, and complete machine assembly. Some leading consumer electronics companies have formed the layout of East Asia/South East Asia/South Asia manufacturing + Asia and Europe R & D + global sales.
At present, the difficulty for Chinese companies to go overseas is to find recognition overseas. The report released by Brunswick on January 22 this year "New Perceptions of Chinese Enterprises Going Global" According to the report, about half of Chinese executives (49%) said that overseas exports and sales have become more important in the past year, but also mentioned that they underestimate the importance of communication work.
To establish brand identity in overseas markets requires more and more entrepreneurs and entrepreneurs to integrate universal values into the brand, convey deep concepts through the brand, and establish deep identity with global consumers and customers, so as to effectively improve the brand Loyalty and recognition can enhance its competitiveness in the global market.
Take Vesta, an environmentally friendly home furnishing brand that goes overseas, as an example. Vesta conveys its value in a way that young consumers agree with in product design, material selection and brand expression. Choose environmentally friendly materials such as bamboo, eucalyptus fiber, and recyclable plastics, disclose carbon emissions , and even donate unsaleable returns to charities, which reflects the brand 's sustainable concept and also attracts a new generation of consumers in the US who pursue environmental protection, organic and sustainable development.
The needs of these three dimensions are intertwined, forming a direct driving force for the globalization of Chinese brands. In the process of globalization, enterprises are not only looking for larger markets and better resources, but also for the value and emotional identity shared with global consumers, so as to achieve greater development space in the global market.
The world has entered an era of parallel polarity between China and the United States , and China has grown into a pole of world political and economic influence. In this context, Chinese brands that have accumulated initial technology, capital and talent will launch a new wave of globalization , a group of "born and globalized" companies driven by innovation and brands will also participate in it .
EqualOcean predicts that by 2030, more than half of the global TOP 500 brands will come from China or have Chinese elements. In the context of changing times, to gain a foothold in overseas markets, Chinese companies must have the ability to allocate resources globally, and at the same time raise the importance of the brand to a strategic level to further strengthen the brand's sense of identity in overseas markets.
Click on the link to learn more about the report or to register for an evaluation, and scan the QR code below to consult with EqualOcean staff.