Chinese companies going international should learn from Japan's mistakes, says academic

As more Chinese companies expand their businesses overseas – staying out of harm’s way as trade frictions with the West intensify – they can learn a lesson from their Japanese predecessors who failed in their own attempts at globalization, a leading academic said.

“China and Japan are very different. But I think the Chinese can learn a lot from Japan’s mistakes,” said Dominique Turpin, a marketing professor at the China Europe International Business School (CEIBS) in Shanghai.

“Major Japanese companies have missed globalization because they lacked a global mindset,” Turpin, also the school’s European president, said in an interview at the World Economic Forum’s Annual Meeting of the New Champions, also known as Summer Davos – in Dalian this week.

Current tensions, centered on new energy trade between China and the United States, as well as the European Union (both have announced tariff increases in electric vehicles (EVs) made in China – are reminiscent of the hostility that greeted Japanese auto exports in the 1980s, said Turpin, a Japan expert who previously served as dean and president of Switzerland’s International Institute for Management Development .

The Western world has underestimated the Chinese’s ability to innovate, Turpin asserted, and when that innovation is combined with the country’s economies of scale, the cost of production per unit is likely to be low no matter how heavily an industry is subsidized: a Focal point of EU and US objections to China’s role in the electric vehicle market.

If you want to go global, you need to trust the locals

Dominique Turpin

These trade barriers are meant to encourage Chinese companies to invest, he said, creating jobs in the bloc rather than destroying them.

“It took about 15 years for the Japanese to be forced to produce cars in Europe. When Nissan created a lot of jobs after starting production in Europe, this kind of political argument disappeared to a certain extent,” Turpin said.

“I think it’s kind of a natural step that things are going faster this time. The major Chinese company has already anticipated that move.”

Turpin was referring to an announcement by electric vehicle giant BYD that it would build a manufacturing plant in Hungary, becoming the first Chinese carmaker to build a passenger car factory in the EU.

Turpin attributed the lack of continued global success of Japanese companies to a sense of complacency.

“If you want to go global, you need to rely on locals,” he said, adding that few Japanese companies would hire foreigners in senior management positions in their overseas businesses.

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“If you think your culture is superior, you’ll never become a global company,” Turpin said. “To me, a global company is a company where you don’t care what color people’s passports are anymore.”

It is too early to tell whether Chinese companies will be able to properly manage their globalisation, he said, citing as better examples companies from smaller countries such as Denmark, home to Lego, shipping giant Maersk and pharmaceutical company China. Novo Nordisk.

“Management is the art of balancing two forces. If you trust the locals too much, you have a problem. If you control them too much, you have another problem.”

Faced with major obstacles in developed countries, many Chinese automakers have… Already pivoted to emerging markets such as Latin America. By 2023, Chinese cars accounted for 19.5 percent of all car sales in Mexico, compared with just 6.4 percent in 2019, according to data from the Mexican Automobile Dealers Association.

“The Chinese are super intelligent people, very pragmatic. “It’s the same strategy that Mao Zedong used to conquer China,” Turpin said, referring to Mao’s revolutionary strategy of “surrounding the cities from the countryside.”

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