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China's outward foreign direct investment
Business Horizons (2008) 51, 485—491
www.elsevier.com/locate/bushor
China’s outward foreign direct investment Wei He a,*, Marjorie A. Lyles b a b
College of Business, Indiana State University, 800 Sycamore Road, Terre Haute, IN 47809, U.S.A. Kelley School of Business, Indiana University, 801 West Michigan Street, Indianapolis, IN 46202-5151, U.S.A.
KEYWORDS China; United States; Outward foreign direct investment; Liability of foreignness
Abstract China’s outward foreign direct investment (FDI) is steadily increasing. The United States is now a key target for China’s outward FDI, and the response by the American public tends to fall at opposite ends of the spectrum: fever or fear. Chinese FDI in the United States faces challenges posed by its liability of foreignness in political, cultural, marketing, and technological aspects. Utilizing mini case studies, we herein examine the polarized responses to Chinese outward direct investment, its history, and the challenges faced by Chinese multinational corporations operating in or attempting to enter the U.S. market. Finally, strategy suggestions are proposed. # 2008 Kelley School of Business, Indiana University. All rights reserved.
1. China’s outward foreign direct investment Like the Taoist philosophy of yin and yang in everything, China’s growing international activity and its foreign direct investment in other countries, such as the United States, have aroused two opposite responses among the citizens of those countries. On one hand, there is a feverish pursuit of Chinese investment; for example, American governors and mayors have flocked to China during the past few years soliciting Chinese investors for their states and cities, as well as promoting Chinese purchase of their goods. As former Virginia governor Mark Warner once remarked, ‘‘Virtually every American governor has visited China’’ (Warner, 2005). On the other hand, fear was the response to Chinese computer maker Lenovo’s acquisition of IBM’s PC * Corresponding author. E-mail addresses: [email protected] (W. He), [email protected] (M.A. Lyles).
division and Chinese oil giant CNOOC’s bid for the mid-sized American oil company Unocal, resulting in raised national security concerns among both the Congress and the public. We believe both views–—China fever and China fear–—are shortsighted and not solidly based on an accurate understanding of China’s increasing economic power. In this article, we argue that China’s growing direct investment in the United States is more economically than politically driven, and therefore should be understood from a business perspective rather than from a political angle. We explore the opportunities and challenges for Chinese multinational corporations (MNCs) to directly invest in the United States. We discuss their lack of experience in foreign operations, which creates a high liability of foreignness, specifically in political, cultural, marketing, and technological aspects, and explore how Chinese firms might deal with these inherent disadvantages of competitiveness. Finally, we give strategic suggestions for Chinese firms which wish to directly invest in the United States.
0007-6813/$ — see front matter # 2008 Kelley School of Business, Indiana University. All rights reserved. doi:10.1016/j.bushor.2008.06.006
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2. China fever vs. China fear China’s entrance into the World Trade Organization (WTO) led many MNCs to view China as an attractive place for their foreign subsidiaries. China’s lively economy and entrepreneurial spirit enhance that attractiveness. These attributes, linked to low labor costs, the seemingly easy transfer of manufacturing activities, and the possibility of serving 1.3 billion customers, appear irresistible. American businesses have looked at options of manufacturing, opening offices, licensing technology, and setting up R&D centers in China. The majority has found these relationships work, although they are sometimes slower and more difficult to implement than predicted. With a clear awareness of China’s rising economic power and Chinese firms’ eagerness to become world-class MNCs by entering the U.S. market, American business representatives have gone to China to recruit Chinese firms as investors in their businesses. In addition to Corporate America’s interest in investing in China, there is a new trend of China fever among American state and local governments and communities for soliciting direct investment from China. More than 20 states have established commercial offices in China (Cox, 2006). Despite China’s unchanged political regime, U.S. state and local leaders tend to see China more like a potential business partner with whom they could work, rather than primarily as a menacing communist country. State and local decision makers’ pragmatic mentality toward foreign direct investment moderates their responses to China, and leads to their largely positive and realistic attitudes about Chinese firms’ investment as a source of jobs and tax revenue. In short, the business of state and local government is business. To them, China is no exception. Fear of China comes in many packages. First is a fear of China’s political power due to its rapidly increasing clout in the international arena. Americans seem to be afraid that China will overtake the United States economically and politically. The trade imbalance is seen as an indication that China is winning and will shortly have more power than the U.S. Most Americans do not realize that many of these imports represent products from American overseas subsidiaries coming back to the United States. Arguments have been made that America is losing its manufacturing base to China and that this causes widespread unemployment. Similar arguments were made in the past about Mexico; within the U.S., this led to strong negative reactions with ongoing ramifications. Linked to this concern is a fear of communism in China and what that means, especially now that most other communist systems have fallen but China’s endures.
W. He, M.A. Lyles Other fears relate to national security, health, and safety issues. Chinese companies have been looking abroad for market expansion, assets, and technology, but there has been a growing distrust of China because of its poor enforcement of product quality, safety measures, and intellectual property rights, among other things. Furthermore, fears surround the sale of U.S. resources to foreigners. Hence, attempts by Chinese firms to acquire American assets, such as CNOOC’s attempt to buy Unocal, are met with resistance and eventually fail. The growing prowess of Chinese firms and the increase of outward direct investment by Chinese firms constitute a primary fear focus. In a similar situation during the 1980s, Japan was accused of seeking global dominance when Japanese firms bought up American companies and real estate. Japanese purchases of prominent properties that once were American icons, such as the Empire State Building, Rockefeller Center, Columbia Pictures, and the Pebble Beach golf course, evoked economic, socio-cultural, and political fears among politicians and the public. However, any fear of unfair competition from Chinese state-owned companies because they don’t have to make money or be responsible for financial losses is outdated. After three decades of reform, especially following a drastic escalation of change since the 1990s, Chinese state firms have taken on a distinctly more capitalistic flavor due to radical restructuring, mergers leading to diversified ownership structures, and massive layoffs. Although the government may still hold the majority share in companies like Lenovo or CNOOC as a legacy of the companies’ founding, government involvement in the strategy and operation of state firms has been diminishing, even for large state-owned firms like those (Pottinger, Gold, Phillips, & Linebaugh, 2005). Each state firm has to earn profits for its shareholders, with the government being merely one of those shareholders, just as their Western counterparts do; Chinese boards of directors largely make decisions on their own.
2.1. Do we understand the context? Sometimes lost in this frenzy is a solid understanding of China and its history. This is a reality check for those people who forget China is still a developing economy, transitioning from a centrally-planned economy to a market economy. It has not reached the efficiency of a true market economy. Typical of many formerly centrally-planned economies, China has many informal ways of getting things done, such as corruption or cash payments. Indeed, 20 years ago China was just developing its technology and
China’s outward foreign direct investment patenting laws; these are still difficult to enforce. Today, fierce competition and declining domestic revenues, combined with government encouragement and financial support, are pushing Chinese firms to globalize in order to establish local sales and distribution networks in host countries, support exports and open up new markets, secure raw materials, and acquire technology and global brands. However, Chinese firms are disadvantaged by their lack of experience in both management and developing brand recognition (Wu, 2005). Aside from the legal and economic environments, the cultural differences are also very hard for foreigners to fully understand. First, China is a communist country with an emerging market economy. What does partial ownership by some government agency mean in the marketplace? For most Americans, this is confusing. Relationships, or guanxi, play an important role in how business is done and how products are distributed. Rules for making business decisions are often based on different criteria than those used for business decisions in the U.S. Moreover, there is widespread corruption in China and people often do not follow any rules, including the legal ones. One has to be fully prepared for a complex, everchanging, unpredictable environment in China.
3. China’s outward direct investment With all the experiences and lessons learned from MNCs operating on its home turf, China is now serious about becoming stronger and growing its own global companies, relying on its leading economy and the world’s largest foreign exchange reserves. The United States has become a natural destination for Chinese MNCs’ direct investment, given its huge and open market, leading-edge technologies, and easy access to the world financial market. China’s outward foreign investment has to date been primarily in Asia or Africa, and many of these deals aim to acquire oil, metal, or commodities. Typically, these investments are not done through a well coordinated plan of the Chinese government, but through fragmented deals by individual companies, some state-controlled and some privately owned. Nonetheless, Chinese government leadership is interested in establishing 30 to 50 globally competitive firms (‘‘The Dragon,’’ 2005).
3.1. When did it start? China’s direct investment in the United States gained attention with Lenovo’s bid for IBM’s PC division, CNOOC’s bid for Unocal, and Haier’s bid for Maytag. But these three cases were by no means the beginning
487 of direct investment by the People’s Republic of China in the United States of America. One of China’s Big Four banks and the country’s major foreign exchange bank, the Bank of China, established its New York branch as early as 1981, right after China’s ‘‘Reform and Opening’’ policy was initiated. The Bank of China is currently operating as a full-scale bank in the United States, with both retail and commercial banking products and services. In the manufacturing sector, Fuyao Glass Industry Group Co. Ltd., China’s largest automotive glass supplier, built an $8 million plant in Greenville, South Carolina in 1994; China’s home appliance conglomerate Haier Group’s U.S. subsidiary, Haier America, built a manufacturing base in Camden, South Carolina in 2000 with a $40 million green-field investment; and China’s largest auto-part maker, and the second largest non-state-owned company, Wanxiang Group established Wanxiang America in Elgin, Illinois in 1999. From Bank of China and Haier, which are mainly state-owned or state-controlled firms, to Fuyao and Wanxiang, the best of China’s private sector, direct investment from mainland China in the United States started well before the year 2005.
3.2. A closer look In 2005, three remarkable cases of Chinese firms’ attempted acquisitions of U.S. companies made headlines on Wall Street as well as around the world: China’s largest computer maker Lenovo’s successful purchase of IBM’s PC division at U.S. $1.75 billion, China’s third largest oil company CNOOC’s controversial bid of $18.5 billion for American counterpart Unocal, and China’s largest appliance maker Haier’s abandoned attempt to buy out American appliance manufacturer Maytag at $1.28 billion. Lenovo’s acquisition of IBM’s PC division was scrutinized by the Committee on Foreign Investment in the United States (CFIUS), the inter-agency watchdog committee of the U.S. government for international investment in the United States, for an exceptionally long 3 months. Several prominent Republican congressmen voiced their considerable concern over the transaction for national security reasons. They believed that the location of IBM’s PC division in North Carolina’s Research Triangle Park, surrounded by several major defense contractors, could facilitate Chinese employees’ access to sensitive technologies; furthermore, IBM PC’s encryption technology could help China to crack confidential U.S. government information because many federal departments are IBM PC customers. One year later, Republican Congressman Donald Manzullo (R — IL) challenged the U.S. Department of State’s decision to purchase 16,000 computers from Lenovo through
488 a contractor because the company is partially owned by a Chinese governmental entity. Manzullo claimed his ‘‘big concern (was) if you have these state-owned enterprises that don’t have to make any money, they can underbid to gain market share’’ (‘‘Lawmaker,’’ 2006, p. A2). Although the LenovoIBM deal was eventually completed in May 2005, the unusual level of scrutiny and suspicion from the U.S. government and legislators created large complications for one of the biggest business deals between the United States and China. In the summer of 2005, China National Offshore Oil Corporation (CNOOC) made a bid for Unocal, a California-based oil company ranked tenth among the U.S. oil giants. For some lawmakers on Capitol Hill, the words China and oil are individually sensitive, and they become much more so when the two hot words are bundled together. In response to heavy lobbying by CNOOC’s rival for the bid, California-based Chevron, two heavyweight Republican Congressmen from California, Richard Pombo and Duncan Hunter, requested that the Bush Administration investigate the national security implications of CNOOC’s bid for Unocal. They stated, ‘‘We fear that American companies will find it increasingly difficult to compete against China’s state-owned and/or controlled energy companies’’ (Pottinger et al., 2005, p. A1). Their efforts led to a congressional resolution requiring the Administration to review CNOOC’s bid. These political pressures would have easily delayed CNOOC’s deal for at least 6 months while it still faced the possibility of rejection by the U.S. government, both elements making CNOOC’s bid much less appealing to Unocal’s shareholders. CNOOC eventually withdrew its bid for Unocal in early August 2007, citing the ‘‘unprecedented political opposition (which) made it very difficult for us to accurately assess our chances of success’’ (Pottinger et al., 2005, p. A1). The anti-CNOOC, poly-economic drama derived from the politicians’ distrust of Chinese government and Chinese firms ended up in favor of CNOOC’s American rival; Chevron successfully acquired Unocal at a price almost $1 billion lower than CNOOC’s offer. Unocal has ‘‘little to do with security of supply for China,’’ and CNOOC’s bid was more a reflection of China’s desire to build its own MNC that ‘‘can compete with the other international companies, and has the skills in the future to negotiate its way into large projects’’ (Barta & Pottinger, 2005, p. A10). American politicians and the American media feared China’s purchase of U.S. assets more than the Japanese firms’ shopping spree in the United States during the 1980s. They tend to perceive China’s direct investment in the United States as suspicious and intimidating.
W. He, M.A. Lyles In the Chinese oil industry, CNOOC ranks third after two state-owned businesses, SinoPec (ranked 16th on the 2008 Fortune Global 500 list) and PetroChina (ranked 25th). As one of China’s most Westernminded and aggressive companies (Oster, 2006; Pottinger et al., 2005), CNOOC is ‘‘not much different from any international oil company. . .in terms of responsibilities and management system,’’ according to Chengyu Fu, CNOOC’s CEO (Oster, 2006, p. B1). Fu, a University of Southern Californiaeducated oil engineer, persuaded CNOOC’s board to bid for Unocal primarily to boost its status in both the domestic and global markets against its two larger domestic competitors and other international giants. As The Wall Street Journal pointed out, ‘‘In China’s increasingly freewheeling economic environment, loans from state institutions aren’t necessarily an indication of central-government support for a project or acquisition’’ (Pottinger et al., 2005, p. A1). The Chinese government was rarely involved in CNOOC’s operation, and did not appear to directly push CNOOC’s bid (Pottinger et al., 2005). Instead, according to Chinese media reports, the Chinese government was not quite happy with the CNOOC board’s determination to pursue the acquisition of Unocal due to the politically high profile disputes it generated. Therefore, Chinese firms have invested in the United States with limited success, due in part to the fear vs. fever dichotomy. It appears Chinese firms may be trying to eliminate this dichotomy by increasing China’s outward direct investment.
4. Opportunities and challenges China has been aggressively shopping for assets around the world (‘‘The Dragon,’’ 2005). According to the 2006 Statistical Bulletin of China’s Outward Foreign Direct Investment, published by the Ministry of Commerce of China (2007), China’s outward direct investment has increased by 60% annually between 2002 and 2006 (see Figure 1). However, when compared with foreign direct investment in the United States from China’s Asian neighbors, as well as other developed European countries, China’s direct investment in the United States is still marginal in both flow and stock. There might be a long way for Chinese MNCs to go before they can catch up with their Japanese or Korean counterparts and become part of mainstream corporate America.
4.1. Liability of foreignness In addition to surviving the normal, lengthy path of internationalization and localization in the United
China’s outward foreign direct investment Figure 1.
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China’s FDI outflow: 1990—2006
Source: Ministry of Commerce of China (2007)
States, Chinese firms have to overcome a unique liability of foreignness that may hinder their progress in doing business in the United States. Liability of foreignness has been broadly defined as all the additional costs incurred by MNCs operating in a foreign country which local firms don’t have to bear (Hymer, 1976; Kindleberger, 1969). It is a natural competitive disadvantage for foreign MNCs in a host country relative to local companies. The liability of foreignness can be derived from at least four general sources: spatial distance, which leads to a direct increase of operation costs in travel, transportation, and coordination; firm-specific costs, due to a particular MNC’s unfamiliarity with the local market and its culture; costs resulting from the host country’s particular political-economic characteristics; and costs from the home country environment (Hymer, 1976; Kindleberger, 1969; Zaheer, 1995). For today’s Chinese MNCs to operate in the United States, the 7,500 mile distance and 12 to 15 hour time difference between China and the United States might create some inconvenience, but are not as severe as the obstacles faced by their Japanese and Korean counterparts two or three decades ago when the latter first invested in the United States. The dramatic development of communication and internet technology, along with over a dozen daily direct flights between major cities in the two countries, half of which were lately approved or opened, actually helps mitigate the burden of physical distance and time difference. Moreover, after three decades of the Reform and Opening policy, China’s economic system, and especially its business operations, such as the stock market, corporate financing, and marketing campaigns, is more similar to that of the United States than ever before. Chinese firms have been growing and learning in China, but some of the liability related to moving overseas comes from not being strong enough in their home market. Mary Ma, the
former CFO of Lenovo, thinks that one of the reasons for its success is that Chinese operations are at a sufficient scale to support moving outward (Orr & Xing, 2007). Many Chinese firms have learned and appreciated the American way of doing business through their U.S. partners which have been operating in China for years. This may assist Chinese firms to adapt themselves to the United States economy and American business operation. We believe, however, that the enormous differences in political and ideological systems between the two countries, as well as Chinese firms’ lack of in-depth knowledge of the U.S. market and American culture, constitute a political liability of foreignness for Chinese direct investment in the United States. Cross-cultural differences are another liability of foreignness for Chinese MNCs that operate in the United States. On Hofstede’s ‘‘cultural maps,’’ for example, China and the United States are as far away as their geographic locations. Among the five dimensions put forth by Hofstede (1993), the two countries are enormously different in terms of Power Distance (U.S.: China = 40: 80), Individualism (U.S.: China = 91: 20), and Long Term Orientation (U.S.: China = 29: 118), and moderately different on Masculinity (U.S.: China = 62: 50) and Uncertainty Avoidance (U.S.: China = 46: 60). These differences imply that Chinese managers doing business in the United States today may encounter no less culture shock than their American counterparts when the latter first went to China more than two decades ago. In addition, unique Chinese cultural values such as guanxi, harmony, the doctrine of the mean, and seniority may also implicitly or explicitly challenge Chinese managers when they are dealing with their more individualistic, ambitious, equalitarian, and liberal American colleagues and employees. Chinese appliance maker Haier’s experience in its Camden, South Carolina factory provides a good
490 example of the cross-cultural challenges for Chinese MNCs and managers in integrating overseas operation and management. For years, in its plants in China, Haier has used something called the ‘‘6-S quality control system,’’ learned from Japanese firms. Each of the six ‘‘S’’ factors represents a performance standard in the original Japanese, such as cleanliness, reliability, safety, and so on. There is a pair of super-sized yellow footprints within a 24 24 inch square on the floor of every plant, overarched by a banner of the 6-S performance standards. Each morning, the supervisor asks the employee(s) who made the most mistakes during the previous day to step on the super-sized footprints, state and reflect upon his or her faults, and then listen to the supervisor’s criticism and other peer colleagues’ comments in front of the entire group of employees. This approach has been very effective in Haier’s Chinese plants, given the ‘‘criticism and selfcriticism’’ practice popular in Chinese organizations over the past half-century. However, Haier’s American employees at its Camden, South Carolina plant refused to follow this corporate ritual because they found it humiliating (Schafer, 2005). Haier’s Chinese managers had to give up on the concept until they reformulated the practice with an American twist. They repainted the footprints green from yellow, and invited only the best performers to step up and share their success tips with other employees. Similarly, Lenovo has successfully overcome some of its cross-cultural gap between former IBM-ers and original Lenovo employees, such as the former’s lack of trust of the latter and the latter’s criticism of lack of discipline on the part of the former. Lenovo did this by focusing on improving communication between the two groups of employees, urging the Americans to speak slower and the Chinese to speak out. Some former IBM employees have already begun to enjoy Lenovo’s ambitious, energetic, and flexible culture, which to them is similar to that of the Silicon Valley start-ups, and quite a contrast to the Big Blue’s bureaucracy (Newman, 2007). These examples illustrate the need for Chinese firms and managers to adapt their corporate culture to the host country’s socio-cultural environment, just as many U.S. companies did in China when they first established a presence there 20 years ago. Many of the American MNCs have successfully integrated their corporate culture within the Chinese context after being in China for as long as two decades. It is reasonable to believe the Chinese will do the same, and possibly at a quicker rate. Misunderstanding cross-cultural differences might be risky, but misjudging business opportunities is equally harmful. The initial failure of Chinese television maker TCL Corporation’s merger with
W. He, M.A. Lyles French electronic giant Thomson’s TV business exemplifies the challenges to Chinese MNCs’ pursuit of global ambitions. In 2003, TCL formed a joint venture with Thomson, an arrangement with 67%: 33% stakes, making TCL the largest producer of television units in the world. Thomson was the owner of the RCA brand; Thomson’s North American Profit Center is located in Indianapolis, but RCA TVs are manufactured in Mexico. Despite TCL’s publicized determination to turn around Thomson’s TV business within 18 months after the merger, its European subsidiary continued to lose money following its high-profile launch in 2003; it was eventually declared bankrupt in May 2007. When reviewing TCL’s unsuccessful expansion in Europe, a company executive commented, ‘‘We anticipated that the biggest challenge for TTE (the TCL-Thomson joint venture) would be the cross-cultural integration of the two firms. However, it turned out to be our misjudgment of (Thomson’s) misguided technology and obsolete brand names that really harmed TTE’s performance’’ (Xu, 2005). He referred to the dramatic technology transformation in the TV-making industry; while consumers tend to prefer LCD flat panel and Plasma TVs, Thomson bet big on the tube-based projection TV, and TCL did not correctly foresee the technology trend and its overwhelming impacts. While certainly neither anticipated nor welcomed, TCL seems to have applied the hard lesson it learned from Europe to its business in North America. Here, it shifted its focus to primarily produce and market LCD high definition TVs, and consolidated its manufacturing facilities from three plants to just one, remarkably cutting both inventory and the time for introducing new products. Its North American subsidiary reported an operating profit in 2006, and looks forward to further improvement (Ramstad & Li, 2006). Similar to the previous case of Haier, TCL’s ambitious plan of globalization got off to a rough start because of its inexperience in the global market. Over time, however, the Chinese MNC is learning from its own mistakes and making better choices in the United States.
4.2. Suggestions In addition to finding ways to overcome liability of foreignness issues, it may be in the best business interests of Chinese MNCs that desire direct investment in the United States to adopt a strategy of avoiding the most sensitive industries, such as energy or defense-relevant ones (e.g., CNOOC’s bid for Unocal). Instead, pairing adequate lobbying and public relations activities with the cautious pursuit of less sensitive technologies (e.g., Lenovo’s acqui-
China’s outward foreign direct investment sition of IBM’s PC division) or the pursuit of less sensitive industries (e.g., auto-part manufacturing, real estate, insurance) may be the course of wisdom. Witness Wanxiang’s American success in becoming a conglomerate of all these areas by starting with auto-part manufacturing.
5. Final thoughts The Chinese economy is expected to surpass that of the United States and become the world’s largest in 20 or 30 years (Shenkar, 2005). With an average growth rate of 60% for China’s outward FDI (Ministry of Commerce of China, 2007), we will certainly see more Chinese MNCs entering the United States. For Chinese MNCs to successfully establish themselves in the United States, however, they need to select lesssensitive industries in which to invest and overcome their liability of foreignness and lack of foreign experience. Peer internationals from other East Asian countries provide good examples for Chinese firms in terms of building presence and prosperity in the United States. For instance, Toyota opened its first manufacturing plant in the United States in 1972 and rolled out its first car in 1988; Honda established its first motorcycle plant in the United States in 1977 and produced its first car in 1982; and Samsung built its first plant in the United States in 1984. Today, all three companies are household brand names in America. We can reasonably expect in the coming 20 to 30 years that Lenovo, Haier, and other Chinese MNCs will also shine in the United States.
References Barta, P., & Pottinger, M. (2005, June 30). Why CNOOC may not be such a big threat. The Wall Street Journal, p. A10.
491 Cox, J. B. (2006, September 19). After landing PC maker Lenovo, N.C. chases more deals with China. The News & Observer. Retrieved October 8, 2007, from http://www.newsobserver. com/1339/story/488128.html Hofstede, G. (1993). Cultural constraints in management theories. Academy of Management Executive, 7(1), 81—94. Hymer, S. (1976). The international operations of national firms. Cambridge, MA: MIT Press. Kindleberger, C. (1969). American business abroad: Six lectures on direct investment. New Haven, CT: Yale University Press. Lawmaker to ask for review of Lenovo deal. (2006, March 25). The Wall Street Journal, p. A2. Ministry of Commerce of China. (2007, September 14). 2006 statistical bulletin of China’s outward foreign direct investment. Retrieved October 8, 2007, from http://hzs.mofcom. gov.cn/accessory/200709/1190343657984.pdf Newman, R. (2007). Lenovo’s great leap: Despite cultural conflicts, the Chinese-IBM computer merger shows signs of success. US News & World Report, 143(13), 48—50. Orr, G., & Xing, J. (2007). When Chinese companies go global: An interview with Lenovo’s Mary Ma. McKinsey Quarterly, 23(1), 17—22. Oster, S. (2006, July 31). Boss talk: China’s offshore oilman; CNOOC Chairman Fu Chenguy regrets withdrawal of bid for Unocal but learned lesson. The Wall Street Journal, p. B1. Pottinger, M., Gold, R., Phillips, M. M., & Linebaugh, K. (2005, August 3). Oil politics: CNOOC drops offer for Unocal, exposing U.S.-Chinese tensions. The Wall Street Journal, p. A1. Ramstad, E., & Li, J. (2006, November 1). TCL to overhaul European TV manufacturing. The Wall Street Journal, p. A14. Schafer, S. (2005, May 9). A Jack Welch of communists. Newsweek, 30—31. Shenkar, O. (2005). The Chinese century: The rising Chinese economy and its impact on the global economy, the balance of power, and your job. Philadelphia: Wharton School. The dragon tucks in: Chinese companies abroad. (2005). The Economist, 376(8433), 71—72. Warner, M. (2005, November 28). A governor looks at Asia. Asia Society. Retrieved October 8, 2007, from http://www. asiasociety.org/speeches/warner05.html Wu, F. (2005). Corporate China goes global. World Economics, 6(4), 171—181. Xu, Y. (2005). TCL faces a tough world as its merger ‘‘went wild.’’ IT Managers’ World. Retrieved June 10, 2006, from http:// biz.163.com/05/0615/09/1M9F4I7600020QDS.html Zaheer, S. (1995). Overcoming the liability of foreignness. Academy of Management Journal, 38(2), 341—363.
www.elsevier.com/locate/bushor
China’s outward foreign direct investment Wei He a,*, Marjorie A. Lyles b a b
College of Business, Indiana State University, 800 Sycamore Road, Terre Haute, IN 47809, U.S.A. Kelley School of Business, Indiana University, 801 West Michigan Street, Indianapolis, IN 46202-5151, U.S.A.
KEYWORDS China; United States; Outward foreign direct investment; Liability of foreignness
Abstract China’s outward foreign direct investment (FDI) is steadily increasing. The United States is now a key target for China’s outward FDI, and the response by the American public tends to fall at opposite ends of the spectrum: fever or fear. Chinese FDI in the United States faces challenges posed by its liability of foreignness in political, cultural, marketing, and technological aspects. Utilizing mini case studies, we herein examine the polarized responses to Chinese outward direct investment, its history, and the challenges faced by Chinese multinational corporations operating in or attempting to enter the U.S. market. Finally, strategy suggestions are proposed. # 2008 Kelley School of Business, Indiana University. All rights reserved.
1. China’s outward foreign direct investment Like the Taoist philosophy of yin and yang in everything, China’s growing international activity and its foreign direct investment in other countries, such as the United States, have aroused two opposite responses among the citizens of those countries. On one hand, there is a feverish pursuit of Chinese investment; for example, American governors and mayors have flocked to China during the past few years soliciting Chinese investors for their states and cities, as well as promoting Chinese purchase of their goods. As former Virginia governor Mark Warner once remarked, ‘‘Virtually every American governor has visited China’’ (Warner, 2005). On the other hand, fear was the response to Chinese computer maker Lenovo’s acquisition of IBM’s PC * Corresponding author. E-mail addresses: [email protected] (W. He), [email protected] (M.A. Lyles).
division and Chinese oil giant CNOOC’s bid for the mid-sized American oil company Unocal, resulting in raised national security concerns among both the Congress and the public. We believe both views–—China fever and China fear–—are shortsighted and not solidly based on an accurate understanding of China’s increasing economic power. In this article, we argue that China’s growing direct investment in the United States is more economically than politically driven, and therefore should be understood from a business perspective rather than from a political angle. We explore the opportunities and challenges for Chinese multinational corporations (MNCs) to directly invest in the United States. We discuss their lack of experience in foreign operations, which creates a high liability of foreignness, specifically in political, cultural, marketing, and technological aspects, and explore how Chinese firms might deal with these inherent disadvantages of competitiveness. Finally, we give strategic suggestions for Chinese firms which wish to directly invest in the United States.
0007-6813/$ — see front matter # 2008 Kelley School of Business, Indiana University. All rights reserved. doi:10.1016/j.bushor.2008.06.006
486
2. China fever vs. China fear China’s entrance into the World Trade Organization (WTO) led many MNCs to view China as an attractive place for their foreign subsidiaries. China’s lively economy and entrepreneurial spirit enhance that attractiveness. These attributes, linked to low labor costs, the seemingly easy transfer of manufacturing activities, and the possibility of serving 1.3 billion customers, appear irresistible. American businesses have looked at options of manufacturing, opening offices, licensing technology, and setting up R&D centers in China. The majority has found these relationships work, although they are sometimes slower and more difficult to implement than predicted. With a clear awareness of China’s rising economic power and Chinese firms’ eagerness to become world-class MNCs by entering the U.S. market, American business representatives have gone to China to recruit Chinese firms as investors in their businesses. In addition to Corporate America’s interest in investing in China, there is a new trend of China fever among American state and local governments and communities for soliciting direct investment from China. More than 20 states have established commercial offices in China (Cox, 2006). Despite China’s unchanged political regime, U.S. state and local leaders tend to see China more like a potential business partner with whom they could work, rather than primarily as a menacing communist country. State and local decision makers’ pragmatic mentality toward foreign direct investment moderates their responses to China, and leads to their largely positive and realistic attitudes about Chinese firms’ investment as a source of jobs and tax revenue. In short, the business of state and local government is business. To them, China is no exception. Fear of China comes in many packages. First is a fear of China’s political power due to its rapidly increasing clout in the international arena. Americans seem to be afraid that China will overtake the United States economically and politically. The trade imbalance is seen as an indication that China is winning and will shortly have more power than the U.S. Most Americans do not realize that many of these imports represent products from American overseas subsidiaries coming back to the United States. Arguments have been made that America is losing its manufacturing base to China and that this causes widespread unemployment. Similar arguments were made in the past about Mexico; within the U.S., this led to strong negative reactions with ongoing ramifications. Linked to this concern is a fear of communism in China and what that means, especially now that most other communist systems have fallen but China’s endures.
W. He, M.A. Lyles Other fears relate to national security, health, and safety issues. Chinese companies have been looking abroad for market expansion, assets, and technology, but there has been a growing distrust of China because of its poor enforcement of product quality, safety measures, and intellectual property rights, among other things. Furthermore, fears surround the sale of U.S. resources to foreigners. Hence, attempts by Chinese firms to acquire American assets, such as CNOOC’s attempt to buy Unocal, are met with resistance and eventually fail. The growing prowess of Chinese firms and the increase of outward direct investment by Chinese firms constitute a primary fear focus. In a similar situation during the 1980s, Japan was accused of seeking global dominance when Japanese firms bought up American companies and real estate. Japanese purchases of prominent properties that once were American icons, such as the Empire State Building, Rockefeller Center, Columbia Pictures, and the Pebble Beach golf course, evoked economic, socio-cultural, and political fears among politicians and the public. However, any fear of unfair competition from Chinese state-owned companies because they don’t have to make money or be responsible for financial losses is outdated. After three decades of reform, especially following a drastic escalation of change since the 1990s, Chinese state firms have taken on a distinctly more capitalistic flavor due to radical restructuring, mergers leading to diversified ownership structures, and massive layoffs. Although the government may still hold the majority share in companies like Lenovo or CNOOC as a legacy of the companies’ founding, government involvement in the strategy and operation of state firms has been diminishing, even for large state-owned firms like those (Pottinger, Gold, Phillips, & Linebaugh, 2005). Each state firm has to earn profits for its shareholders, with the government being merely one of those shareholders, just as their Western counterparts do; Chinese boards of directors largely make decisions on their own.
2.1. Do we understand the context? Sometimes lost in this frenzy is a solid understanding of China and its history. This is a reality check for those people who forget China is still a developing economy, transitioning from a centrally-planned economy to a market economy. It has not reached the efficiency of a true market economy. Typical of many formerly centrally-planned economies, China has many informal ways of getting things done, such as corruption or cash payments. Indeed, 20 years ago China was just developing its technology and
China’s outward foreign direct investment patenting laws; these are still difficult to enforce. Today, fierce competition and declining domestic revenues, combined with government encouragement and financial support, are pushing Chinese firms to globalize in order to establish local sales and distribution networks in host countries, support exports and open up new markets, secure raw materials, and acquire technology and global brands. However, Chinese firms are disadvantaged by their lack of experience in both management and developing brand recognition (Wu, 2005). Aside from the legal and economic environments, the cultural differences are also very hard for foreigners to fully understand. First, China is a communist country with an emerging market economy. What does partial ownership by some government agency mean in the marketplace? For most Americans, this is confusing. Relationships, or guanxi, play an important role in how business is done and how products are distributed. Rules for making business decisions are often based on different criteria than those used for business decisions in the U.S. Moreover, there is widespread corruption in China and people often do not follow any rules, including the legal ones. One has to be fully prepared for a complex, everchanging, unpredictable environment in China.
3. China’s outward direct investment With all the experiences and lessons learned from MNCs operating on its home turf, China is now serious about becoming stronger and growing its own global companies, relying on its leading economy and the world’s largest foreign exchange reserves. The United States has become a natural destination for Chinese MNCs’ direct investment, given its huge and open market, leading-edge technologies, and easy access to the world financial market. China’s outward foreign investment has to date been primarily in Asia or Africa, and many of these deals aim to acquire oil, metal, or commodities. Typically, these investments are not done through a well coordinated plan of the Chinese government, but through fragmented deals by individual companies, some state-controlled and some privately owned. Nonetheless, Chinese government leadership is interested in establishing 30 to 50 globally competitive firms (‘‘The Dragon,’’ 2005).
3.1. When did it start? China’s direct investment in the United States gained attention with Lenovo’s bid for IBM’s PC division, CNOOC’s bid for Unocal, and Haier’s bid for Maytag. But these three cases were by no means the beginning
487 of direct investment by the People’s Republic of China in the United States of America. One of China’s Big Four banks and the country’s major foreign exchange bank, the Bank of China, established its New York branch as early as 1981, right after China’s ‘‘Reform and Opening’’ policy was initiated. The Bank of China is currently operating as a full-scale bank in the United States, with both retail and commercial banking products and services. In the manufacturing sector, Fuyao Glass Industry Group Co. Ltd., China’s largest automotive glass supplier, built an $8 million plant in Greenville, South Carolina in 1994; China’s home appliance conglomerate Haier Group’s U.S. subsidiary, Haier America, built a manufacturing base in Camden, South Carolina in 2000 with a $40 million green-field investment; and China’s largest auto-part maker, and the second largest non-state-owned company, Wanxiang Group established Wanxiang America in Elgin, Illinois in 1999. From Bank of China and Haier, which are mainly state-owned or state-controlled firms, to Fuyao and Wanxiang, the best of China’s private sector, direct investment from mainland China in the United States started well before the year 2005.
3.2. A closer look In 2005, three remarkable cases of Chinese firms’ attempted acquisitions of U.S. companies made headlines on Wall Street as well as around the world: China’s largest computer maker Lenovo’s successful purchase of IBM’s PC division at U.S. $1.75 billion, China’s third largest oil company CNOOC’s controversial bid of $18.5 billion for American counterpart Unocal, and China’s largest appliance maker Haier’s abandoned attempt to buy out American appliance manufacturer Maytag at $1.28 billion. Lenovo’s acquisition of IBM’s PC division was scrutinized by the Committee on Foreign Investment in the United States (CFIUS), the inter-agency watchdog committee of the U.S. government for international investment in the United States, for an exceptionally long 3 months. Several prominent Republican congressmen voiced their considerable concern over the transaction for national security reasons. They believed that the location of IBM’s PC division in North Carolina’s Research Triangle Park, surrounded by several major defense contractors, could facilitate Chinese employees’ access to sensitive technologies; furthermore, IBM PC’s encryption technology could help China to crack confidential U.S. government information because many federal departments are IBM PC customers. One year later, Republican Congressman Donald Manzullo (R — IL) challenged the U.S. Department of State’s decision to purchase 16,000 computers from Lenovo through
488 a contractor because the company is partially owned by a Chinese governmental entity. Manzullo claimed his ‘‘big concern (was) if you have these state-owned enterprises that don’t have to make any money, they can underbid to gain market share’’ (‘‘Lawmaker,’’ 2006, p. A2). Although the LenovoIBM deal was eventually completed in May 2005, the unusual level of scrutiny and suspicion from the U.S. government and legislators created large complications for one of the biggest business deals between the United States and China. In the summer of 2005, China National Offshore Oil Corporation (CNOOC) made a bid for Unocal, a California-based oil company ranked tenth among the U.S. oil giants. For some lawmakers on Capitol Hill, the words China and oil are individually sensitive, and they become much more so when the two hot words are bundled together. In response to heavy lobbying by CNOOC’s rival for the bid, California-based Chevron, two heavyweight Republican Congressmen from California, Richard Pombo and Duncan Hunter, requested that the Bush Administration investigate the national security implications of CNOOC’s bid for Unocal. They stated, ‘‘We fear that American companies will find it increasingly difficult to compete against China’s state-owned and/or controlled energy companies’’ (Pottinger et al., 2005, p. A1). Their efforts led to a congressional resolution requiring the Administration to review CNOOC’s bid. These political pressures would have easily delayed CNOOC’s deal for at least 6 months while it still faced the possibility of rejection by the U.S. government, both elements making CNOOC’s bid much less appealing to Unocal’s shareholders. CNOOC eventually withdrew its bid for Unocal in early August 2007, citing the ‘‘unprecedented political opposition (which) made it very difficult for us to accurately assess our chances of success’’ (Pottinger et al., 2005, p. A1). The anti-CNOOC, poly-economic drama derived from the politicians’ distrust of Chinese government and Chinese firms ended up in favor of CNOOC’s American rival; Chevron successfully acquired Unocal at a price almost $1 billion lower than CNOOC’s offer. Unocal has ‘‘little to do with security of supply for China,’’ and CNOOC’s bid was more a reflection of China’s desire to build its own MNC that ‘‘can compete with the other international companies, and has the skills in the future to negotiate its way into large projects’’ (Barta & Pottinger, 2005, p. A10). American politicians and the American media feared China’s purchase of U.S. assets more than the Japanese firms’ shopping spree in the United States during the 1980s. They tend to perceive China’s direct investment in the United States as suspicious and intimidating.
W. He, M.A. Lyles In the Chinese oil industry, CNOOC ranks third after two state-owned businesses, SinoPec (ranked 16th on the 2008 Fortune Global 500 list) and PetroChina (ranked 25th). As one of China’s most Westernminded and aggressive companies (Oster, 2006; Pottinger et al., 2005), CNOOC is ‘‘not much different from any international oil company. . .in terms of responsibilities and management system,’’ according to Chengyu Fu, CNOOC’s CEO (Oster, 2006, p. B1). Fu, a University of Southern Californiaeducated oil engineer, persuaded CNOOC’s board to bid for Unocal primarily to boost its status in both the domestic and global markets against its two larger domestic competitors and other international giants. As The Wall Street Journal pointed out, ‘‘In China’s increasingly freewheeling economic environment, loans from state institutions aren’t necessarily an indication of central-government support for a project or acquisition’’ (Pottinger et al., 2005, p. A1). The Chinese government was rarely involved in CNOOC’s operation, and did not appear to directly push CNOOC’s bid (Pottinger et al., 2005). Instead, according to Chinese media reports, the Chinese government was not quite happy with the CNOOC board’s determination to pursue the acquisition of Unocal due to the politically high profile disputes it generated. Therefore, Chinese firms have invested in the United States with limited success, due in part to the fear vs. fever dichotomy. It appears Chinese firms may be trying to eliminate this dichotomy by increasing China’s outward direct investment.
4. Opportunities and challenges China has been aggressively shopping for assets around the world (‘‘The Dragon,’’ 2005). According to the 2006 Statistical Bulletin of China’s Outward Foreign Direct Investment, published by the Ministry of Commerce of China (2007), China’s outward direct investment has increased by 60% annually between 2002 and 2006 (see Figure 1). However, when compared with foreign direct investment in the United States from China’s Asian neighbors, as well as other developed European countries, China’s direct investment in the United States is still marginal in both flow and stock. There might be a long way for Chinese MNCs to go before they can catch up with their Japanese or Korean counterparts and become part of mainstream corporate America.
4.1. Liability of foreignness In addition to surviving the normal, lengthy path of internationalization and localization in the United
China’s outward foreign direct investment Figure 1.
489
China’s FDI outflow: 1990—2006
Source: Ministry of Commerce of China (2007)
States, Chinese firms have to overcome a unique liability of foreignness that may hinder their progress in doing business in the United States. Liability of foreignness has been broadly defined as all the additional costs incurred by MNCs operating in a foreign country which local firms don’t have to bear (Hymer, 1976; Kindleberger, 1969). It is a natural competitive disadvantage for foreign MNCs in a host country relative to local companies. The liability of foreignness can be derived from at least four general sources: spatial distance, which leads to a direct increase of operation costs in travel, transportation, and coordination; firm-specific costs, due to a particular MNC’s unfamiliarity with the local market and its culture; costs resulting from the host country’s particular political-economic characteristics; and costs from the home country environment (Hymer, 1976; Kindleberger, 1969; Zaheer, 1995). For today’s Chinese MNCs to operate in the United States, the 7,500 mile distance and 12 to 15 hour time difference between China and the United States might create some inconvenience, but are not as severe as the obstacles faced by their Japanese and Korean counterparts two or three decades ago when the latter first invested in the United States. The dramatic development of communication and internet technology, along with over a dozen daily direct flights between major cities in the two countries, half of which were lately approved or opened, actually helps mitigate the burden of physical distance and time difference. Moreover, after three decades of the Reform and Opening policy, China’s economic system, and especially its business operations, such as the stock market, corporate financing, and marketing campaigns, is more similar to that of the United States than ever before. Chinese firms have been growing and learning in China, but some of the liability related to moving overseas comes from not being strong enough in their home market. Mary Ma, the
former CFO of Lenovo, thinks that one of the reasons for its success is that Chinese operations are at a sufficient scale to support moving outward (Orr & Xing, 2007). Many Chinese firms have learned and appreciated the American way of doing business through their U.S. partners which have been operating in China for years. This may assist Chinese firms to adapt themselves to the United States economy and American business operation. We believe, however, that the enormous differences in political and ideological systems between the two countries, as well as Chinese firms’ lack of in-depth knowledge of the U.S. market and American culture, constitute a political liability of foreignness for Chinese direct investment in the United States. Cross-cultural differences are another liability of foreignness for Chinese MNCs that operate in the United States. On Hofstede’s ‘‘cultural maps,’’ for example, China and the United States are as far away as their geographic locations. Among the five dimensions put forth by Hofstede (1993), the two countries are enormously different in terms of Power Distance (U.S.: China = 40: 80), Individualism (U.S.: China = 91: 20), and Long Term Orientation (U.S.: China = 29: 118), and moderately different on Masculinity (U.S.: China = 62: 50) and Uncertainty Avoidance (U.S.: China = 46: 60). These differences imply that Chinese managers doing business in the United States today may encounter no less culture shock than their American counterparts when the latter first went to China more than two decades ago. In addition, unique Chinese cultural values such as guanxi, harmony, the doctrine of the mean, and seniority may also implicitly or explicitly challenge Chinese managers when they are dealing with their more individualistic, ambitious, equalitarian, and liberal American colleagues and employees. Chinese appliance maker Haier’s experience in its Camden, South Carolina factory provides a good
490 example of the cross-cultural challenges for Chinese MNCs and managers in integrating overseas operation and management. For years, in its plants in China, Haier has used something called the ‘‘6-S quality control system,’’ learned from Japanese firms. Each of the six ‘‘S’’ factors represents a performance standard in the original Japanese, such as cleanliness, reliability, safety, and so on. There is a pair of super-sized yellow footprints within a 24 24 inch square on the floor of every plant, overarched by a banner of the 6-S performance standards. Each morning, the supervisor asks the employee(s) who made the most mistakes during the previous day to step on the super-sized footprints, state and reflect upon his or her faults, and then listen to the supervisor’s criticism and other peer colleagues’ comments in front of the entire group of employees. This approach has been very effective in Haier’s Chinese plants, given the ‘‘criticism and selfcriticism’’ practice popular in Chinese organizations over the past half-century. However, Haier’s American employees at its Camden, South Carolina plant refused to follow this corporate ritual because they found it humiliating (Schafer, 2005). Haier’s Chinese managers had to give up on the concept until they reformulated the practice with an American twist. They repainted the footprints green from yellow, and invited only the best performers to step up and share their success tips with other employees. Similarly, Lenovo has successfully overcome some of its cross-cultural gap between former IBM-ers and original Lenovo employees, such as the former’s lack of trust of the latter and the latter’s criticism of lack of discipline on the part of the former. Lenovo did this by focusing on improving communication between the two groups of employees, urging the Americans to speak slower and the Chinese to speak out. Some former IBM employees have already begun to enjoy Lenovo’s ambitious, energetic, and flexible culture, which to them is similar to that of the Silicon Valley start-ups, and quite a contrast to the Big Blue’s bureaucracy (Newman, 2007). These examples illustrate the need for Chinese firms and managers to adapt their corporate culture to the host country’s socio-cultural environment, just as many U.S. companies did in China when they first established a presence there 20 years ago. Many of the American MNCs have successfully integrated their corporate culture within the Chinese context after being in China for as long as two decades. It is reasonable to believe the Chinese will do the same, and possibly at a quicker rate. Misunderstanding cross-cultural differences might be risky, but misjudging business opportunities is equally harmful. The initial failure of Chinese television maker TCL Corporation’s merger with
W. He, M.A. Lyles French electronic giant Thomson’s TV business exemplifies the challenges to Chinese MNCs’ pursuit of global ambitions. In 2003, TCL formed a joint venture with Thomson, an arrangement with 67%: 33% stakes, making TCL the largest producer of television units in the world. Thomson was the owner of the RCA brand; Thomson’s North American Profit Center is located in Indianapolis, but RCA TVs are manufactured in Mexico. Despite TCL’s publicized determination to turn around Thomson’s TV business within 18 months after the merger, its European subsidiary continued to lose money following its high-profile launch in 2003; it was eventually declared bankrupt in May 2007. When reviewing TCL’s unsuccessful expansion in Europe, a company executive commented, ‘‘We anticipated that the biggest challenge for TTE (the TCL-Thomson joint venture) would be the cross-cultural integration of the two firms. However, it turned out to be our misjudgment of (Thomson’s) misguided technology and obsolete brand names that really harmed TTE’s performance’’ (Xu, 2005). He referred to the dramatic technology transformation in the TV-making industry; while consumers tend to prefer LCD flat panel and Plasma TVs, Thomson bet big on the tube-based projection TV, and TCL did not correctly foresee the technology trend and its overwhelming impacts. While certainly neither anticipated nor welcomed, TCL seems to have applied the hard lesson it learned from Europe to its business in North America. Here, it shifted its focus to primarily produce and market LCD high definition TVs, and consolidated its manufacturing facilities from three plants to just one, remarkably cutting both inventory and the time for introducing new products. Its North American subsidiary reported an operating profit in 2006, and looks forward to further improvement (Ramstad & Li, 2006). Similar to the previous case of Haier, TCL’s ambitious plan of globalization got off to a rough start because of its inexperience in the global market. Over time, however, the Chinese MNC is learning from its own mistakes and making better choices in the United States.
4.2. Suggestions In addition to finding ways to overcome liability of foreignness issues, it may be in the best business interests of Chinese MNCs that desire direct investment in the United States to adopt a strategy of avoiding the most sensitive industries, such as energy or defense-relevant ones (e.g., CNOOC’s bid for Unocal). Instead, pairing adequate lobbying and public relations activities with the cautious pursuit of less sensitive technologies (e.g., Lenovo’s acqui-
China’s outward foreign direct investment sition of IBM’s PC division) or the pursuit of less sensitive industries (e.g., auto-part manufacturing, real estate, insurance) may be the course of wisdom. Witness Wanxiang’s American success in becoming a conglomerate of all these areas by starting with auto-part manufacturing.
5. Final thoughts The Chinese economy is expected to surpass that of the United States and become the world’s largest in 20 or 30 years (Shenkar, 2005). With an average growth rate of 60% for China’s outward FDI (Ministry of Commerce of China, 2007), we will certainly see more Chinese MNCs entering the United States. For Chinese MNCs to successfully establish themselves in the United States, however, they need to select lesssensitive industries in which to invest and overcome their liability of foreignness and lack of foreign experience. Peer internationals from other East Asian countries provide good examples for Chinese firms in terms of building presence and prosperity in the United States. For instance, Toyota opened its first manufacturing plant in the United States in 1972 and rolled out its first car in 1988; Honda established its first motorcycle plant in the United States in 1977 and produced its first car in 1982; and Samsung built its first plant in the United States in 1984. Today, all three companies are household brand names in America. We can reasonably expect in the coming 20 to 30 years that Lenovo, Haier, and other Chinese MNCs will also shine in the United States.
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