Expert calls for careful planning as more enterprises expand abroad

He gave the example of a Chinese company whose executives didn't fully understand the production management standards for explosives in an African country. The outcome was that the company's blasting materials couldn't be produced according to the original design.

In some countries, weak infrastructure facilities have meant unexpected costs for Chinese investors in mining projects. As a result, they didn't achieve the expected returns. Some projects fell behind schedule as well, he added.

"Chinese companies should strive for the rights giving them priority use of ancillary facilities, or even operating rights, to ensure normal production," said Shen.

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He urged Chinese companies to join forces when investing overseas to reduce risks, achieve a stronger bargaining position and gain better access to financing.

Nearly 83 percent of the Chinese companies investing directly overseas are private enterprises. Their investments account for about half of all corporate foreign investment, said Wang, who is also vice-chairman of the 12th National Committee of the Chinese People's Political Consultative Conference.

"I hope private enterprises will develop internationalization strategies based on their own characteristics," he said.

"The companies should improve their legal awareness by studying relevant laws of the countries where they will invest. They should respect the local religions, culture and customs, uphold corporate social responsibility and build a harmonious relationship with local residents," he continued.

Chinese enterprises have learned fast through rapid global expansion in recent years, but some of them still lack adequate knowledge of foreign markets. Many don't have experience in cross-border transactions and investment.

They also have a shortage of people with experience in managing transactions and carrying out integration after an investment, said Kenneth K.F. Lee, managing director of transaction advisory services at Ernst & Young (China) Advisory Ltd's branch in Beijing.

"Some foreign companies used Chinese enterprises as a chip to raise the bidding prices for investment projects. It was partly because Chinese companies were unwilling to spend a lot of time and energy making a careful assessment of the projects and the local market," said Lee.

He warned Chinese investors to think twice before making a decision to invest abroad.

"Top executives of Chinese companies should ask themselves why they want their companies to go overseas, rather than expanding globally just for the sake of expanding," he said.

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