Under the leadership of Trump, the Republican Party has sparked a “super red tide” in this US election, sweeping through the President, Senate, and House of Representatives (with the lead yet to be determined), coupled with the conservative dominated Supreme Court (6-3). For at least the next two years, Trump will dominate American politics without substantial constraints on his power.

Trump 2.0 has returned, and the policies he will advance are now being speculated around the world. However, there is almost a consensus on one point, which is the enormous destruction of traditional globalization. So, after eating the melon of Trump’s return, global public opinion began to spread anxiety. Especially for Chinese foreign trade practitioners and overseas enterprises, the anxiety in the public opinion field is almost overflowing from the screen. As soon as Trump was elected, foreign trade practitioners snatched up all the plane tickets to Vietnam for “inspection”.

After all, Trump had already stated before the election that he would impose tariffs of 60% or even higher on Chinese products exported to the United States, and impose tariffs of 10% on products exported from other countries to the United States. In Trump’s thinking, the past globalization meant that the United States suffered losses while other countries took advantage. To make America great again, the only way is to implement the American version of the “isolationist” policy, with tariffs being the most important lever. Only in this way can we achieve the dual return of capital and technology, even if it harms the interests of allies.

As mentioned in our article a few days ago, the economic competition between China and the United States will be a long-term and irreversible process. The United States has chosen to end its own dominated globalization order, and the full flow of neoliberal production factors has given way to domestic manufacturing and national security. Efficiency is no longer the top priority value orientation, and national security will be the new theme of international politics in the next decade. In Sullivan’s words, it means de risking.

It is widely predicted that after Trump takes office, tariffs on China will be implemented soon, followed by extortion of the world. With the United States’ indiscriminate actions towards the world, both actively and passively, the world will impose varying degrees of restrictions on foreign trade,

On November 7th, the General Administration of Customs released data showing that the total value of China’s goods trade imports and exports in the first 10 months of this year was 36.02 trillion yuan, a year-on-year increase of 5.2%.

In the first 10 months, China’s goods trade exports amounted to 20.8 trillion yuan, an increase of 6.7%; Imports amounted to 15.22 trillion yuan, an increase of 3.2%; The trade surplus was 5.58 trillion yuan, an increase of 17.6%.

Among them, the total value of trade with the United States was 4.01 trillion yuan, an increase of 4.4%, accounting for 11.1%. Exports to the United States increased by 4.9%, imports from the United States increased by 2.9%, and the trade surplus with the United States was 2.07 trillion yuan, expanding by 5.8%.

According to simple static calculations based on models by CITIC, if the United States imposes tariffs on Chinese goods exceeding 60%, it may drag down China’s exports to the United States by 16% and reduce overall exports by 2.3%. For China, which still relies on foreign trade to some extent, this is a huge challenge in the short term.

Relatively speaking, in the long run, this is also a historical opportunity period for China to build a new type of globalization system that is no longer dominated by the West. In ‘Trump’s Return, Not a Conservative’ Restoration ‘, we argue that although globalization is still a historic trend, its structure, form, and mechanism have slowly begun to undergo profound changes.

Understanding, grasping, and adapting to these changes is crucial for our country, which has been deeply affected by globalization over the past few decades. In the international economic and trade system, the future new geopolitics and global supply chain restructuring will coexist and influence each other for a long time.

In this situation, Chinese foreign trade and overseas enterprises have undoubtedly entered the deep-water zone. The game rules in the future will be much more complex.

The Primary Stage of Globalization for Chinese Enterprises

Over the past decade, more and more Chinese companies have embarked on the path of globalization by expanding their overseas markets. However, compared to multinational giants in Europe, America, Japan, and South Korea, the level of globalization development of Chinese enterprises is still in its early stages.

In addition to the accumulation of time, it is also necessary for enterprises to truly transform their thinking, skills, and governance methods, from Chinese companies with overseas business to truly multinational corporations. This not only means the deployment of personnel and the establishment of headquarters, but also means that the legal and risk control structure is more in line with the governance model of multinational enterprises. For example, German companies in China have a very successful slogan, “In China, for China”, which has effectively brought the company closer to the host country and is now being adopted by more and more multinational corporations. By rooting in the host country and treating winning the market as a strategic deployment for the enterprise, achieving a high degree of binding between interests and the local area.

In the local area, Chinese companies need to learn to expand their influence and fully bind their interests with local stakeholders. More importantly, it is necessary to be adept at leveraging local human and intellectual resources and respond to risks and challenges from a local perspective.

In September 2020, the Trump administration issued a “ban on WeChat (overseas version of WeChat)”. The US Department of Commerce announced on September 18 that WeChat and TikTok would be removed from all app stores in the United States from 0:00 on September 20 and would no longer be updated, and WeChat Pay would be banned simultaneously.

Faced with the fierce US government, the U.S. WeChat Users Alliance, led by Chinese lawyers, as the plaintiff, urgently filed a motion in the California court to suspend the ban, claiming that it violated the First Amendment of the US Constitution.

The motion was supported by Judge Laurel Biler of the California District Court and approved on September 19th the motion to ban Executive Order 13943 (i.e. the ban on WeChat) from taking effect. That is to say, this ban has been prohibited from being enforced.

Leier Bieler wrote: “The evidence of the plaintiff (namely the WeChat Society) shows that WeChat is the only means of communication for many people in the American society, not only because people cannot use other applications in China, but also because Chinese people with limited English ability can only choose to use WeChat.” She also said that this ban could not escape the review of the First Amendment to the Constitution. Because the ban on WeChat did not provide sufficient evidence to prove that this executive order was specifically designed to address security issues in the United States. There are obvious alternatives to the ban, such as banning WeChat from government agencies like in Australia, or taking other measures to address data security issues

This is a typical successful case of using local laws and ways of thinking to protect the legitimate interests of enterprises. More and more Chinese companies are now following suit. Since the beginning of this year, companies such as DJI and Hesai Technology have taken up legal weapons from the United States and sued the Pentagon.

Since the United States claims to have a separation of powers, Chinese companies are resorting to their own way of dealing with others. Once the US court disregards evidence and makes a judgment, it will be conducive to exposing the hypocrisy of the US judiciary around the world and publicly condemning American hegemony. If the presiding judge judges the case in accordance with the law, the legitimate rights and interests of Chinese enterprises will be effectively protected. This kind of inequality is a necessary mindset for Chinese enterprises to go global.

Chinese companies should keep in mind the ‘Indian lesson’

Of course, facing the situation where the United States is determined to target Chinese companies, even the best strategies and means of resistance cannot solve all the troubles. In recent years, the United States has frequently used the pretext of “endangering national security” to attack Chinese companies, so it is not high on the list of Chinese companies going abroad, especially after Trump’s second visit to the palace. Only after substantive policies are relatively clear can most companies dare to make decisions.

Although the instability of the global market is increasing in the short term, for many Chinese enterprises, it is impossible to wait for them to go to sea. After all, the domestic market has become a Fried Dough Twists. So now there is also a blind trend of going abroad, especially for emerging markets, and the media is constantly creating hype, such as describing going to Africa as a gold rush. It is not uncommon to go out to sea and suffer losses without clear judgment and sufficient preparation.

A true understanding of a region or a country cannot be obtained solely through media or superficial investigations. In the preparatory stage, enterprises need to conduct comprehensive research on one or several potential target markets, studying key factors that affect business operations such as local supply chain foundation, political stability, and partner background, in order to accurately determine market maturity, target market matching with the enterprise itself, and other situations.

Now, there are mainly two types of destinations left for Chinese companies to go abroad: developed countries outside the United States and emerging southern countries.

Developed countries, including EU member states, Japan and South Korea, Australia, Singapore, etc., have sound laws and infrastructure, strong consumption power, good industrial foundation, and large market capacity, but competition is also relatively fierce.

In contrast, emerging southern countries such as Southeast Asia, the Middle East, Latin America, and individual countries in Africa are generally characterized by weak industrial foundations, variable policies and regulations, but rapid local economic growth and relatively weak competition, providing greater development opportunities and space for Chinese enterprises.

Whether choosing to enter developed countries or emerging southern countries, for Chinese companies, before considering profit models, they still need to focus more on risk prevention. If we hadn’t tightened this string, even if we were lucky enough to make money for a while, we might have just become a safe deposit box and “Tang Monk’s flesh” for some local forces. Chinese companies should especially bear in mind the lessons learned from the Indian market.

On June 28th, media reported that Chinese mobile phone manufacturer Vivo India is in talks with India’s Tata Group to acquire a majority stake and establish a joint venture, in order to comply with the Indian government’s requirements for senior executives to be Indian nationals and for marketing networks to be localized.

Previously, at the end of 2023, India’s anti financial crime agency arrested the interim CEO, CFO, and one external consultant of vivo India’s subsidiary on the grounds of combating financial crime, among whom the interim CEO is of Chinese nationality. This is at least the third time in recent years that vivo has been investigated and suppressed by the Indian side.

On October 10, 2023, Indian law enforcement agencies arrested four people on suspicion of money laundering, including one Chinese employee of vivo India. In early October, the Indian side also accused Vivo and Xiaomi of helping a local news website illegally transfer funds. The website was investigated for criticizing the Indian government’s policies. In 2022, the Indian Telecommunications Authority also froze 119 bank accounts related to vivo India. The Indian media has extensively hyped up several things.

In addition, with the similar experiences of several Chinese mobile phone companies in India in recent years, it is difficult not to suspect that the Indian government and consortium have played an invisible role in it. Closing the door and killing pigs, first lure Chinese companies into India with the size of the Indian market to build a mobile phone industry chain for them. When the time is ripe, wait for the opportunity to kick out Chinese companies. The experience of Chinese mobile phone companies adds a footnote to the saying, ‘India makes money and India spends it, and they want to take it home.’.

Going abroad requires legal prerequisites

Another representative market is Mexico. Since 2018, due to the US trade war with China, some Chinese companies have begun to diversify some of their investments to Southeast Asia and Mexico. Then it was exported to the United States locally, commonly known as bath crabs in the industry. At present, with Trump’s claim that he will not allow Chinese car manufacturers to export cars produced in Mexico to the United States, the entire bath crab model has also been cast a shadow.

But in fact, entering the Mexican market was not an easy task before this. Southeast Asia still has the advantage of geographical connectivity with China, while Mexico, on the other hand, is further separated by the ocean and has significant differences in race, language, and law. Chinese companies are facing even greater difficulties on their sea routes to the United States.

Recently, the well-known American think tank Rhodium Group released a report estimating that China’s total investment in Mexico has reached $13 billion, six times the official data, mainly concentrated in the automotive, electronics, and consumer goods industries. Especially in the automotive supply chain, companies such as CATL, Junsheng Electronics, Top Group, and Sanhua Intelligent have all gone to Mexico to invest and establish factories.

But while Chinese companies are diving into Mexico, risks have already emerged.

In May of this year, the Mexican government suddenly announced the cancellation of its nine major mineral concessions in Mexico, citing that Ganfeng Lithium did not meet the minimum investment standards.
In fact, since Ganfeng Lithium successfully acquired Bacanora, a company with 9 mineral concessions, for no more than 190 million pounds in 2022, the total investment has exceeded 1 billion, far exceeding the minimum investment standard.

Now, on the eve of the upcoming production of the Ganfeng Mexico Phase I project, which can generate an annual production capacity of about 20000 tons of lithium hydroxide by 2024, it has directly been hit hard by the Mexican government.

The reason for this is that the Mexican Ministry of Economy suddenly proposed an amendment to the mining law and it was passed, forcibly nationalizing all lithium mines.

The reason behind this is not difficult to speculate. Mexico is a country deeply cultivated by American capital, and as the United States sees China as its biggest competitor, it is extremely vigilant about all actions involving China. Lithium, as a key material for electric vehicle batteries, has received high attention from the US government.

Both the Trump and Biden administrations have introduced a series of mineral resource policies that encourage the development of mining and processing technologies, regularly review and update the Key Mineral List, and also engage allies and key mineral storage countries internationally to establish a “mineral security partnership”. Mexico, as the backyard and bedside of the United States, has enough motivation to cause trouble for China.

In addition, there are many legal “hidden stakes” in Mexico, such as the fact that building a factory in Mexico is not enough to acquire land, and there are also “clearing fees” and “building permit fees” for the loss of green vegetation, as well as facing various strict tax reviews.

The Mexican mafia culture based on historical origins has also taught Chinese companies a profound lesson. There are many “intermediary organizations” in the area that have deep disputes with government departments. Companies that pay protection fees to them can “take the lead” in various aspects such as electricity, water, and even customs clearance of goods. Those who do not pay can wait slowly.

And Mexico also has significant differences in its human resources system compared to China. Some media have described it as’ Chinese bosses cannot win over Mexican workers’.

Multiple factors have led to significant losses for the first batch of Chinese companies investing in Mexico.

A series of painful lessons have taught Chinese companies that in their overseas journey, in addition to paying attention to business models and technological risks, they also need to highly value local legal and policy risks, understand the rules of the game before investing resources.

Chinese enterprises are facing significant changes in their national territory and rules when going global. They must fully recognize the importance of “legal prerequisites” and invest sufficient budget in the legal field to understand and comprehend the rules. It is possible to apply the rules and make decisions before taking action.

Only by putting the law first, hiring excellent domestic foreign-related legal and risk control consultants, and combining local legal resources to conduct due diligence on the legal and legal environment, business environment, and major risks of the proposed investment country, fully evaluating and customizing risk control strategies and crisis plans, can investment risks be minimized to the greatest extent possible.

On the other hand, the cultivation of domestic legal talents should also focus more on risk control in the field of overseas law. As Jiao Hongchang, a counselor of the State Council, said at the recent “2024 National Forum,” “Chinese enterprises are still lacking in their overseas intellectual property layout, application, and awareness of intellectual property risk prevention and control. They are prone to unfair treatment and sanctions, and have to face frequent overseas litigation. Measures should be formulated to build a first-class team of foreign-related legal talents, international arbitration institutions, and foreign-related legal service institutions, and accelerate the improvement of foreign-related legal service levels

Exploring Chinese style Going Global in the Construction of New Globalization

In ‘Trump’s Return, Not a Conservative’ Restoration ‘, we mentioned that the decline of the United States was accompanied by many changes in global mechanisms, the most important of which was the emergence of reflexive contradictions in the globalization structure dominated by transnational capitalism.

During the forty years when neoliberalism dominated the world, it was also the forty years when Western transnational capital ruled the world and, in conjunction with the hegemonic order, undermined the independent will of the vast majority of countries. Many European and American multinational corporations backed by Western economic hegemony not only brought many disasters to the Third World, but also ultimately contributed to the hollowing out of their own industries. Trump rose to power in this context.

For China, a socialist country and the largest developing country, the purpose of enterprises going abroad is not to learn from the West’s economic colonization. Therefore, in going abroad, they should not only learn to use the laws and regulations of the capitalist world to protect themselves, but also pay great attention to regulating their own behavior and maintaining China’s international image. Especially, they should not act recklessly just because the legal environment in many developing countries is not sound. After a large number of Chinese companies entered Africa, the behavior of some private enterprises in the local area is difficult to praise.

On the other hand, China’s future multinational corporations cannot, like European and American companies, drain their domestic industrial capacity and employment opportunities in the name of factor flow and global capital allocation. Going abroad does not mean cutting off relations with the motherland, especially for Chinese enterprises. Without the security guarantee brought by China’s current economic level and international status, it is impossible to compete with the Western hegemonic order. If one always wants to become a global citizen and a Martian, disregarding the development of their homeland and people, they will eventually become rootless weeds.

So, just like China’s socialist market economy, the overseas expansion of Chinese enterprises should also form a unique Chinese model in the future. After the United States turned to isolationism, in order to achieve the long-term goal of a community with a shared future for mankind, China must promote the establishment of a new model of globalization that is equal and diverse. Chinese companies going abroad will be important participants in this process and should have corresponding awareness and sense of responsibility.

Take Internet companies for example. Over the years, Google and other companies have become tools for the United States to achieve information hegemony and promote the color revolution worldwide. The process of Chinese Internet enterprises going to sea is also the process of fighting against the American information hegemony. Like TikTok, it does not take any stance on its own, but instead truthfully portrays the living conditions and public opinion trends of the lower echelons of American society. In China, the excessive internal competition of Internet enterprises has caused many problems to the society. The process of going global is not only a process of deeply participating in China’s promotion of the new globalization pattern, but also a process of transforming the enterprise itself.

For production-oriented enterprises, fierce competition and internal competition in China are unavoidable. After going abroad, unity should outweigh competition, and they should not engage in internal strife or violence overseas. Otherwise, what is the significance of the country encouraging going abroad?

Two recent events have sparked widespread discussion. One is the China Europe electric vehicle negotiation, where some companies have privately contacted the EU. Secondly, Lenovo has filed an intellectual property lawsuit against ZTE in the UK High Court.

Not to mention the right and wrong inside, this kind of litigation war between Chinese companies overseas is quite puzzling.

The communication cost between Chinese companies is not high, and they can sit down and talk about anything. It cannot be discussed. China also has its own complete intellectual property legal system to make fair judgments, which has sparked lawsuits overseas, confirming that Europe and America still have the highest judicial power. Has the unprecedented great change gone back? The international political and economic order is built upon these repeated arbitration rulings.

In our previous article ‘TikTok’s Difficulties, Chinese Capitalists’ Coming of Age Ceremony’, we mentioned that Chinese companies need to recognize the trend of the times and their own position in the era. The current trend is already evident, as the United States is moving further away from its once dominant global order, and Chinese companies have bid farewell to the era of globalization dividends, truly facing the test of adulthood.

How to find the appropriate mode, position oneself, and find the frequency that best fits the national strategy in the complex overseas environment is something that overseas enterprises need to constantly explore and summarize. Learning has a cost, both people and companies have inertia, and the dividend period has passed. The loss of not learning is increasingly greater than the cost of learning. Since 2018, both domestically and internationally, the loss of not studying has become increasingly severe.

After all, the economic laws of the capitalist world have never been gentle, always filled with iron and blood.