The Rise of Chinese Multinationals: The Changing Landscape of Global Competition

Abstract

The past fifteen years have seen a major breakthrough for Chinese Multinationals. Today, a fifth of the Fortune Global 500 companies are from China. Their rise is reminiscent of the emergence of U.S. companies post-World War II. Today, Chinese companies account for more than half of the top five firms across the Banking, Automobile, Crude Oil Production, Engineering and Construction, Logistics, Metals, Mining, Petroleum Refining and Telecom sectors. Yet, their behavior differs from that of traditional multinationals. While for American companies the priority has been the optimization of shareholder-value, Chinese companies have prioritized growth over profits. This expansion has moved beyond natural markets to advanced economies, particularly in service-based, consumer-related or other “new” industries such as renewable energies. Likewise, the increased involvement in global Mergers and Acquisitions (M&As) is one illustration of this ascent. The competitive advantages are diverse. First, Chinese MNCs have lower production costs compared to their counterparts in advanced economies. Second, they follow a strategy in which revenues are maximized at the expense of gross margins. Third, since a majority of customers in China still yield low purchasing power, Chinese companies are prone to design products/services in more cost-effective ways.

This chapter is based on the Emerging Markets Institute Report 2017. Casanova, L.; Miroux, A. 2017. Emerging Market Multinationals Report: Emerging Multinationals in a Changing World. Emerging Markets Institute in collaboration with the OECD development Center. SC Johnson School of Management. Cornell University. http://bit.ly/eMNCreport. The contribution of Abdel Bouhamidi, Research Assistant is gratefully acknowledged as well as the editors: Eudes Lopes and Jennifer Wholey Lehmann.