Chinese Companies Look Abroad

Over the last few years, tech giants, including the world’s largest telecommunications equipment makers, have aimed to establish or expand relationships in a country where the majority of people still don’t own a phone: China.

Despite remarkable growth in a country that feeds about four times as many people — 1.3 billion mouths — as the United States, Chinese companies also are plotting for expansion overseas. China Telecom, the incumbent phone company that the government recently deregulated, opened U.S. headquarters in November 2002.

At the Accenture Global Convergence Forum Wednesday in Scottsdale, Ariz., executives of Chinese-based companies noted that while growth remains strong, it has slowed compared to recent years and the average revenue per user among the country’s 220 million mobile subscribers is shrinking.

Such factors have incited Chinese companies to seek new products and other ways to increase their revenue and profitability, these people say. One trend: partnerships among Chinese and foreign companies.

“I think partnerships [are] very important to all the Chinese companies,” says Dr. William W.Y. Lo, executive director and vice president of mobile operator China Unicom.

Jane Chen, vice president and head of network business at Chinese telecom equipment maker ZTE, says vendors are exploring the international market, but they do not have the experience or sales channels, two reasons for possible partnerships. Chinese vendors, such as ZTE, today have a mature and competitive product line, she said, noting ZTE only made a phone switch a decade ago.

Han Zhou, vice president of China Telecom [USA], says he has observed a number of partnerships among equipment makers, but sparse activity among carriers. It is “just beginning,” he says. Zhou mentioned a venture between AT&T Corp. and China Telecom in Shanghai. In March 2002 the joint venture Unisiti was launched to provide business customers data services in a district of Shanghai. The venture is between AT&T, China Telecom subsidiary Shanghai Telecom and Shanghai Information Investment.

Lo, of Unicom, says it is important that Chinese companies approach the foreign market cautiously and with a clear purpose, not just for the sake of expansion.

Hakon Jacobsen, a partner with Accenture, says foreign companies entering a partnership or joint venture in China face challenges commonly experienced throughout the globe: For example, they must have the same objectives and spend adequate time determining how to market the products and services.

But China also poses unique challenges: companies must be patient and wait longer for their return on investment than in other countries – a decade, Jacobsen says.

Many U.S. companies partnering with foreigners have not stuck around that long.

In recent years, many notable joint ventures have collapsed. Among those: the Global One venture, a concern targeting multinational corporations. Sprint Corp., France Telecom and Deutsche Telecom were partners in the venture. Cultural differences and egos got in the way, says Sprint PCS president Len Lauer, and the companies were not aligned on strategies. The venture collapsed in January 2000.