Multinationals still have a key part to play

Updated: 2015-10-06 08:58

By Roger Chen(China Daily USA)

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China's market, the largest in the world for many consumer brands, is obviously strategically important to multinationals. For many years, leading global companies, including Volvo Group, have benefited by developing their operations through investment and cooperation with local partners.

Nowadays, China's economic transformation has picked up speed with the government's efforts to upgrade the country's industrial base in order to develop new growth. This has set the stage for the Belt and Road Initiative, which reflects the top-down thinking of driving regional and global economic development through international integration.

Simply put, the Belt and Road Initiative, which was proposed in 2013, is a trade and infrastructure network that includes the Silk Road Economic Belt and the 21st Century Maritime Silk Road. The network connects Asia, Europe and Africa and passes through more than 60 countries and regions with a population of about 4.4 billion.

 Multinationals still have a key part to play

A map of the 21st Century Maritime Silk Road at a commodity fair in Yiwu, Zhejiang province. The Belt and Road Initiative reflects the thinking of driving regional and global economic development through international integration.

For multinationals in China, the initiative provides an excellent opportunity to expand growth. According to an Asian Development Bank forecast, total investment in infrastructure in Asia will reach $8.28 trillion within the next 10 years - 13 times China's 4 trillion yuan stimulus package introduced in 2008.

Data from the Ministry of Commerce has showed that direct investment by Chinese enterprises in countries along the Belt and Road Initiative reached $7.05 billion in the first half of this year. This involved 1,401 planned construction projects in 60 countries, including new contracts worth $37.55 billion.

Naturally, this speaks volumes about China's ability to cooperate with different partners in relevant regions. While the Belt and Road Initiative promises immense opportunities, it also entails risks and requires a clear understanding of various crucial factors in those countries. These include geopolitics, cultural conflict, commercial risks, and trade and administrative barriers.

In this respect, multinationals here can play a unique role by supporting Chinese industries in these regional projects. Many multinationals have operated in countries along the Belt and Road Initiative for many years. During this period, they have established comprehensive business networks and acquired partners from diversified industries.

Their deep understanding of the local political environment, business atmosphere and culture has earned them excellent reputations. So, if Chinese enterprises can launch a strategy of cooperation with these multinationals, they will yield exceptional results.

One major global brand that has a rich experience in diversified markets is Volvo Group, a company which has a large presence in China. The company believes that for the Belt and Road Initiative to be a success it should be put on a sustainable footing from the beginning.

This means that businesses must have respect for local cultures and traditions while advancing their economic interests. They should also pursue sustainable development that will benefit society and the environment.

As multinationals push their agendas, they need to have a clear understanding of the role of the Chinese government as the "guide" in this project. Volvo Group, for example, believes the best way to do this is by:

Increasing transparency in Belt and Road Initiative projects by publishing lists in a timely manner and opening financing to private capital.

Ensuring cooperation in project design, as well as establishing an order of priorities, including sustainable development in an energy-efficient and environmentally-friendly way.

Taking measures to remove trade and administrative barriers to improve efficiency.

In the logistics field, where Volvo Group operates, it may be worth promoting recognized standards for freight vehicles, oil quality and emissions. In the end, multinationals and their Chinese partners have an important role to play in the success of the Belt and Road Initiative.

The author is president of Volvo (China) Investment Co Ltd.

(China Daily USA 10/06/2015 page16)

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