IIICF | China-based enterprises "going out" creating new business opportunities

By APD writer Hu Yahui

China-based enterprises say they are creating new business opportunities and promoting mutual development with their partners under the country’s “going out” strategy.

Representatives of the enterprises made the remarks at the just-concluded 10th International Infrastructure Investment and Construction Forum (IIICF) in Macao, which opened on Thursday and Friday.

KPMG China: Enhancing international private capital participation

At the forum, KPMG China Friday released a report under the theme of “Charting the course of 'Belt and Road' cooperation together: Enhancing international private capital participation in 'Belt and Road' infrastructure projects”. The report was jointly made by the Market and Price Institute of China’s National Development and Reform Commission (NDRC) and the China International Contractors Association.

Below are key findings and recommendations from the report:

1. Shortage of private capital is not the primary challenge for infrastructure projects in countries along the 'Belt and Road'. The wider issue is the lack of pipelines of bankable opportunities in these markets. It means there is a lack of projects that are financially viable, with an acceptable risk profile, and which are structured appropriately to enable them to be considered 'investable' by providers of international private capital.

2. Providers of international private capital are interested to participate in 'Belt and Road' infrastructure projects and have capabilities and experience that could assist governments as they work to improve infrastructure connectivity. At the same time, Chinese companies need to work with providers of international private capital, not only to help bridge project funding gaps, but more importantly to learn from their experience of managing, constructing, financing and operating infrastructure assets to improve the success of these projects, and open up new market opportunities, including in developed markets.

3. Notwithstanding this, many of the Chinese companies we talked to said that because of the higher risks associated with 'Belt and Road' infrastructure projects and various institutional constraints or capability limitations, it is difficult to raise project financing on acceptable terms, manage financial risks and achieve sustainable, profitable returns. These challenges with de-risking 'Belt and Road' projects result in potential providers of international private capital taking a cautious approach towards financing them.

4. To overcome this, the key recommendation of our report is that governments, companies, multilateral organizations and professional firms have to work together to strengthen institutional capacity, build risk management systems, expand financing channels and establish platforms for public-private cooperation in the promotion, financing and delivery of 'Belt and Road' infrastructure projects, to create a market which is conducive to international private capital participation in these projects.

On the sidelines of the forum, Vaughn Barber, Global Chair of KPMG Global China Practice said that "The report offers practical recommendations for how governments, companies, multilateral organizations and professional firms can work together to develop a 'Belt and Road' infrastructure market. These include working with governments to build credible project pipelines and de-risk projects; develop internationally recognized benchmark standards for financing, constructing, and operating 'Belt and Road' infrastructure; and expand private sector capacity for infrastructure investment in 'Belt and Road' countries".

Guangxi Liugong Group: Continuing to explore the international market

At the 5th China-LAC Infrastructure Cooperation Forum, a sub-forum of the IIICF, Zeng Guang’an, board chairman of Guangxi Liugong Group Co., Ltd., offered three advices to participants based on their successful experience of internationalization strategy in the Latin American market.

First, Latin America has a huge market and long-term development potential, thus, Chinese companies could take Latin America as their strategic market.

Second, Chinese companies should enhance cooperation with local governments in Latin America, and must abide by local laws and regulations so that they can closely combine with local industry and economic development.

Third, Chinese companies should establish a good relationship with the local community and shoulder their due social responsibilities.

Liugong operates businesses in more than 100 countries, with 5 R&D centers, 3 manufacturing plants and 10 overseas subsidiaries serving customers worldwide. It sells between 50,000 and 60,000 construction machinery products every year.

After years of efforts, the company has achieved local manufacturing from the purely marketing in Latin America.

Zeng also hailed the forum as an opportunity of enhancing cooperation between countries and achieving mutually beneficial cooperation and a win-win situation.

SINOTRUK: Helping China’s construction companies “going out”

At the Forum, SINOTRUK said that they are committed to promoting innovation and upgrading, improving product quality and strengthening service capacity as the leading company of China's heavy trucks. In 2018, the company sold more than 300,000 units of vehicles, a year-on-year increase of 14%, of which heavy trucks sold 169,000 units, an increase of 7.7%.

By the end of 2018, SINOTRUK has established 70 offices around the world, and developed 268 dealers, 264 service outlets and 236 accessory outlets in more than 90 countries, and established 21 parts center libraries in 15 countries and regions, Moreover, SINOTRUK has established 20 overseas production bases in 12 countries and regions.

Under the Belt and Road Initiative, SINOTRUK will continue to use the localized marketing service network to help construction companies “going out” and show a new image of “made in China” to the world.

(ASIA PACIFIC DAILY)