China, the sixth largest economy in the world, has become the investment hotspot for foreign multinational corporations (MNCs). Now China is looking at how it can develop its own MNCs.

Around 200 delegates, including representatives from leading Chinese enterprises and foreign multinationals, scholars and government officials, are attending the two-day 2004 Council Conference of the China International Institute of Multinational Corporations, which opened in Beijing Friday morning. They are discussing investment trends of foreign MNCs and how Chinese enterprises can invest abroad to gradually build their own.

Multinationals play a vital role in integrating today’s globalized economy. Their production, sales, trade and R&D expenditures account for a huge share of the world’s total.

The majority of the world’s multinational companies have now invested in China, and many have made huge profits from the Chinese market, one of the most dynamic in the world.

Wu Yibing, president of McKinsey & Company’s Beijing branch, said at the conference that MNCs now consider China not only a huge consumer market, but also a global manufacturing base.

The importance of the Chinese market also offers opportunities to Chinese companies. The country has already become the major producer of electronic goods, home appliances, handsets, daily consumables and more.

Wu said that it is necessary for leading Chinese companies to seek new avenues of growth to maintain their strength in the market. Overseas sales offer enormous opportunities for development.

However, Wu warned that oversupply has brought the price of Chinese products far below international standards. Chinese enterprises must shift their focus to cost control and technical innovation.

The labor cost advantage is far from enough to build a leading global enterprise. Chinese companies should transform their advantage from low labor cost to leading technologies. They should also strengthen their skills in financial management, operations, marketing, strategy development and professional training.

Lu Yuebing, the vice president of ALSTOM (China) Investment, said that there are three phases in building an MNC: commodity trade, licensing production and setting up a joint venture or wholly owned company overseas.

He said that Chinese enterprises should develop gradually, citing Lenovo, a leading Chinese PC maker, as an example. It first produced low-end personal computers, then moved toward high-end products. It started in distribution, then expanded to manufacturing and finally R& D.

Lu also suggested that Chinese enterprises focus on their core business, set up strategic partnerships with foreign multinationals, and increase expenditures on R&D, chain building and branding.

(China.org.cn by staff reporter Tang Fuchun July 10, 2004)