"One Belt, One Road" The Internationalization of China's SOEs

Decades have passed since China’s state-owned enterprises (SOEs) started their internationalization. Many impressive achievements have been made, yet there is still room for improvement. On September 13, 2015, the Central Committee of the CPC and State Council published a top-level government policy paper entitled ”Guidelines to Deepen Reforms of SOEs”, in fact a de-facto blue-print for the further reform of SOEs. The guidelines stated that SOE reforms aim to achieve a socialist market economy and improve the modern enterprise system. What this means, in effect, is that SOEs, especially larger SOEs, should compete in global markets, allocate resources across the world, and increase operational efficiency. Step by step, China is implementing its national strategy for a new era of economic development and opening up to the outside world, i.e. the Silk Road Economic Belt and the 21st-century Maritime Silk Road (“One Belt, One Road” or “OBOR”) Initiative. These initiatives have created more favorable external conditions for SOEs to invest abroad and thus ushered in a new age of internationalization. It is also likely that the internationalization of SOEs will change focus from mere expansion to improving operations management and enhancing global competitiveness by taking advantage of the OBOR Initiative. Through surveys of middle and senior-level SOE managers, we obtained insights into SOE participation in the OBOR Initiative as well as learning about the challenges they face. This paper presents several representative solutions to such challenges, and aims to offer some new ideas on how Chinese SOEs can successfully internationalize.

Norman Sze
Deloitte China Managing Partner

Flora Wu
Deloitte China Senior Manager