Chinese companies are going abroad despite new regulations

27 February 2017

Glen Murphy / Regional Director / China

One of the pre-requisites for being able to successfully work in China is the ability to simultaneously hold two completely opposite thoughts in your head and understand that they are both true.

Recently, we’re seeing this apparent contradiction play out as follows –Chinese companies are continuing to make international acquisitions and are really hitting their straps on the global stage, but at the same time, they and foreign companies operating in China are facing tighter restrictions on capital outflow.

We’ve had reports from a few companies recently who have been experiencing difficulty in getting money out of China. Analysts at global risk consultancy Control Risks say that there has been an on-going tightening on restrictions followed by new guidelines being issued on 26 January by The State Administration of Foreign Exchange. These new guidelines specify mandatory documents for companies to remit profits above USD50,000, clarify management of foreign exchange for trade and overseas investment, and encourage foreign currency inflows.

Control Risks advise that while the guidelines are not aimed at restricting repatriation of funds, they will likely cause delays due to increased scrutiny and inconsistent implementation. At the same time, Chinese outbound investments will be more closely scrutinised and likely face difficulties in going through, however this does not signal the government’s intention to reverse its wider ‘going abroad’ strategy.

Of course all of this is going on against a backdrop of a rapidly changing geo-political world where we’ve seen President Xi present at the World Economic Forum in Davos as the new champion of globalisation and trade. Commercially, we are also seeing big moves from e-commerce giant Alibaba which indicate that the ‘going abroad’ strategy is still definitely alive and kicking.

Alibaba’s recent announcement of their Olympic Games sponsorship deal over the next 10 years makes it likely they will become a household name outside of China. The deal is reportedly the biggest in Olympic history, worth around USD800 million, and will help Alibaba catapult into the realms of globally recognised brands like Coca Cola, McDonald’s and Visa. Alibaba’s founder, Jack Ma, has been widely praised for the deal which covers the provision of computing services, analytical services and the creation of an online marketplace for Olympic merchandise.

Closer to home, the founder was also on hand at another symbol of Alibaba’s increasing global presence when he opened their new Australia and New Zealand headquarters in Melbourne on 4 February. In his speech at the event, the founder reiterated the importance that he believes countries like Australia and New Zealand have to the world today. New Zealand Minster for Economic Development, Simon Bridges, also spoke at the gala event which was well-attended by New Zealand companies who are working closely with TMall and other Alibaba e-commerce platforms.

Through the opening of the new office, and the expansion of the Alibaba team in Australasia, we’re going to be getting to know a lot more about Alibaba in the years to come –so long as they can get the USD800 million sponsorship money out of the country.