Survival Guide for Chinese Enterprises Entering the “Deep Waters” of International Markets: What to Do When Rules Vary from Country to Country?
Hello everyone, I’m your financial observer. Today’s topic is about all Chinese companies that are either already operating overseas or planning to do so.
In the past, when we talked about companies going global, it was like sending a large ship out to sea—as long as the sails were big enough and the direction was correct, the ship could ride the waves. But things have changed. The ocean is no longer calm; it’s now filled with various “reefs” and “whirlpools” in the form of different national laws, regulations, and compliance requirements.
Recently, at a summit organized by the United Nations Global Compact, representatives from companies such as Hikvision, Xinye Technology, and Zijin Mining gathered to discuss a core issue: global compliance is becoming increasingly fragmented and decentralized. In other words, there’s no longer a one-size-fits-all guide for going international; each country has its own set of rules, and these rules are constantly changing.
This might seem abstract to many. Let’s put it this way: imagine you want to open a restaurant in different countries. In Country A, you must use stainless steel tableware; in Country B, you can’t use plastic straws; in Country C, your menu must be translated into the local language and approved by the government. If you try to use the same “universal” menu and tableware from your home country, you’re likely to face significant difficulties.
So, how do Chinese companies navigate this complex landscape of varying regulations? From this news article, we can identify four key survival strategies.
1. Say Goodbye to a One-Size-Fits-All Approach: Localization Is the Only Defense
Many companies initially try to replicate their domestic management models overseas. However, this approach no longer works. The news highlights a stark reality: compliance is no longer just the responsibility of the legal department; it’s a fundamental aspect of business survival.
Take Xinye Technology, a company in the fintech industry, for example. When they entered the Southeast Asian market, they found that the requirements for licenses, data transfer, and digital identity verification varied greatly from country to country. Trying to apply one set of rules to all countries not only violated regulations but also proved extremely inefficient.
Their approach was practical: Thorough research is a thousand times more important than remedial actions. Before entering a new market, they assessed the local regulatory environment first. More importantly, they established a local workforce, with over 80% of their employees in their overseas offices.
Why is this effective?
Because locals understand the local customs and regulatory trends better. Local employees can interpret the nuances of regulations and understand the real needs of consumers. It’s like hiring a Beijing-based chef to run a restaurant in Beijing—she knows the local tastes better than a chef from Sichuan. For companies, a local workforce acts as a sensitive “radar” that can alert them to potential compliance issues early on.
2. Compliance Is Not a Cost, but a Competitive Barrier Created by Scale
Many people think of compliance as simply spending money on lawyers and changing processes, a pure cost center. However, Huang Fanghong, the chief compliance officer at Hikvision, offers a counterintuitive view: Compliance capabilities are actually a competitive advantage for large companies.
She gave a concrete example: the new packaging regulations that took effect in the EU in August. These regulations require packaging to be recyclable, limit the use of certain chemicals, and require traceability information. This means companies must know the exact materials, weight, and volume of each box and track them back to their suppliers.
What does this mean for small companies?
It’s a dead end. Small companies don’t have the resources to establish such extensive databases or the manpower to meet these detailed requirements.
What does it mean for large companies?
It’s an opportunity. Large companies like Hikvision can adjust their internal processes, require suppliers to cooperate, and build comprehensive data systems.
In simple terms:
When regulatory barriers become so high that only giants can meet them, it’s like the giants are clearing out their competitors. Small companies that can’t afford the compliance costs are forced out, making way for those that have made compliance a standardized process. The more investment a company makes in compliance, the higher the barriers, and the harder it is for new entrants to succeed.
3. Don’t Just Focus on Shipping: Compliance Issues Often Lie in Hidden Areas
We often think that compliance is just about the product export process—ensuring the customs documents are correct and the product meets standards. But the news reveals that risks often lie in less obvious areas. Huang Fanghong pointed out that many companies focus on the product itself but overlook other aspects, such as spare parts, inventory, and returned products. These may seem trivial, but they are part of the compliance chain. For example, a poorly handled returned part could violate environmental or data privacy laws.
Another crucial factor is management’s commitment: Compliance often leads to increased costs and slower processes. If management decides to cut corners, the compliance system can collapse.
Interpretation:
Compliance is not just the legal department’s job; it requires a team that understands both the business and the regulations. It also requires leadership to prioritize long-term goals over short-term profits. Building a strong compliance culture is more important than hiring the most expensive lawyers.
4. Find the “Greatest Common Divisor” in Fragmented Regulations: Use Certainty to Counter Uncertainty
Facing fragmented global regulations, do companies feel at a loss? Not necessarily. Xie Xionghui from Zijin Mining proposed a strategic approach: Search for the greatest common divisor—universal values and standards recognized globally, such as the United Nations’ Sustainable Development Goals (SDGs) or green and low-carbon practices.
Why is this effective?
Although national laws vary, the overall trends are similar. For example, environmental protection is a global consensus. By adhering to the highest environmental standards, companies can meet the requirements in most countries, reducing the risk of being hindered by different regulations.
Another strategy is to target regions with more stable regulations. Xinye Technology expanded from Southeast Asia, where regulations vary greatly and change quickly, to Australia, where the rules are strict but stable. Although the entry barriers are higher and the process is longer, the rules are clear and predictable.
In simple terms:
It’s like choosing between a casino with changing rules and a bank with fixed rules. Although banks may earn less, you know the rules won’t change suddenly. For companies seeking long-term stability, a stable regulatory environment is a valuable asset.
Summary: The Next Phase of Going Global Is About Precision
The core message of this news is that Chinese companies are moving from a phase of aggressive expansion to a phase of meticulous management in international markets:
1. No one-size-fits-all solutions: Each market requires tailored approaches, and local teams are essential.
2. Compliance is competitiveness: Strong compliance capabilities create barriers that protect large companies from smaller competitors.
3. Details matter: Pay attention to seemingly trivial aspects like spare parts, inventory, and management attitudes, as they can be critical.
4. Embrace common standards: By aligning with global best practices, companies can reduce the risks of varying regulations.
For investors, understanding these strategies is valuable. Companies that invest heavily in compliance, have strong local teams, and operate in multiple mature markets tend to be more resilient and have greater long-term growth potential. In this era, surviving the long term is more important than growing quickly.