International Business Law Advisor Insights on International Litigation & Transactions

Chinese State-Owned Firms Abroad: Like Arnold Schwarzeneggar or Danny Devito?

Posted in Business Transactions, International Investments, international law, international manufacturing, international trade

international business attorney, Santiago Cueto, international lawyer, international law firmFor years now the international business community has been hearing the familiar refrain of how difficult it is for private-owned firms to keep up with Chinese state-owned enterprises (or SOE).

I mention this because The Wall Street Journal’s China real Time Report has a provocative article out today, Chinese State-Owned Firms Not so Muscular Abroad.

For whatever reason, the title of the article reminded me of the duality famously captured in the film Twins starring Arnold Shwarzeneggar and Danny Devito.

So I’ll go with it.

Strong Like Arnold Schwarzeneggar.

The article goes into all the things that make state-owned enterprises so strong and competitive:

State-owned enterprises, and the allegedly unfair subsidies that power their growth around the world, have become objects of fear and loathing among Western multinationals and global free traders.

While all that may be true, all that fear and loathing may be misplaced according to a fascinating new study by the Boston Consulting Group.

Weak Like Danny Devito.

To the surprise of many, the study found that:

[S]tate ownership may actually be more of a hindrance than a help. That’s particularly true of Chinese state firms.”

The study then goes on to identify a host of factors to explain why state firms are weaker competitors in the global economy:

Their relative competitive advantage is in their home markets; they’re generally not as attuned to the needs of consumers; they don’t manage people as well; they’re more risk-averse when it comes to foreign M&A; and they meet political resistance abroad.”

As the study, points out however, China’s SOE may simply prefer not to take on global competitors in some sectors because there are easier profits to be made at home.

Maybe Both.

In looking at all this, I think it’s a combination of both.  But I think the latter is by choice.

What do you think?