Recently, the Dutch government forcibly took control of the global assets of Nexperia, a wholly-owned subsidiary of China’s Wingtech Technology, citing “national security” and stripping the Chinese side of its control.
This action by the Dutch government, which violates international laws and regulations, politicizes economic cooperation and generalizes security concerns, is not an isolated incident.
This behavior, which is essentially a “blatant theft” under the guise of security, serves as a warning to all Chinese enterprises, including steel companies, that are “going out” or preparing to do so. These events tell us that in fields involving core technologies and strategic resources, geopolitical factors are omnipresent, and Chinese steel companies may face increasing difficulties in their global expansion. What should be done? Besides utilizing legal means, it is more important to understand a principle: true security is not obtained through others’ promises, but by taking control into one’s own hands.
First, it is essential to choose peaceful and friendly countries as destinations for global expansion. The most basic and important condition for foreign investment is the political relationship between the investing country and the target country; a peaceful and friendly political relationship is a prerequisite for economic and cultural exchanges and cooperation. Enterprises should strive to select countries that maintain friendly relations with China, have mutually beneficial cooperation, and stable political situations. At the same time, they should actively explore emerging markets, diversify investment regions, reduce political, economic, and market risks, and minimize losses caused by regional risks. Currently, there are some successful domestic cases worth learning from.
Secondly, it is crucial to conduct overseas information collection and risk assessment. Whether in the planning stage before “going out” or in the development, construction, and investment operation stages after “going out,” enterprises must strengthen the collection and analysis of overseas information. They can collaborate with international professional institutions or organizations, utilizing external resources and channels to conduct comprehensive investigations and understand the political, economic, cultural, legal, regulatory, institutional, and technological dimensions of the target country or region, as well as the target resources, enterprises, and projects themselves, to avoid cognitive biases and valuation discrepancies caused by information asymmetry. On this basis, enterprises should comprehensively assess the political stability, policy continuity, and diplomatic relations of the target country or region, and prudently evaluate the market value, future returns, and risks of the target resources, enterprises, and projects.
Furthermore, risk management must be strengthened, and execution must be reinforced. Enterprises should systematically manage risks from multiple dimensions, including policy, market, and operations, and enhance execution.
First, it is essential to enhance compliance awareness, strictly adhere to compliance bottom lines, and consciously follow local laws, regulations, and customs. Before “going out,” enterprises should comprehensively assess the foreign investment policies and relevant regulations of the target country or region, as well as requirements regarding data security, technology exports, and intellectual property protection; after “going out,” they should establish compliance monitoring mechanisms, dynamically track changes in policies and regulations in the target country or region, and timely adjust business strategies.
Second, strengthen market risk management and enhance risk resistance capabilities. Enterprises should reduce geopolitical risks through deepening regional collaboration and industrial cooperation. For example, Hebei Iron and Steel Holding acquired Swiss Degao. Enterprises should optimize global supply chain layouts, expand diversified supplier networks, and reduce dependence on a single market. For instance, China Baowu is developing iron ore projects in Australia and Guinea, while Shougang has acquired iron ore in Peru to disperse the pressure on strategic resource supply. Enterprises should layout in countries and regions along the “Belt and Road” to avoid existing mature markets and enter emerging markets. For example, China Baowu cooperated with Aramco to build the world’s first green low-carbon full-process thick plate factory in Saudi Arabia to serve customers in the Middle East and North Africa; enterprises like Qingshan, Jianlong, and Delong have entered Southeast Asia and other emerging markets by complementing existing channel resources with capacity layouts in Southeast Asia. Enterprises can also implement risk transfer strategies by purchasing overseas investment insurance and including risk-sharing clauses in contracts to transfer some risks.
Third, deepen local integration and strengthen operational risk management. Enterprises should form localized teams, follow local business practices, respect local business cultures and customs, and enhance local people’s recognition and acceptance of Chinese enterprises; implement a “localization of interests” strategy, actively fulfill social responsibilities, participate in local environmental protection, support community development, and other public welfare undertakings, strengthen employee safety training, protect employee rights, and demonstrate corporate social value, thereby enhancing public image and social credibility. Of course, while deepening local integration, it is essential to keep core assets, core technologies, and core personnel firmly in one’s own hands.
Fourth, establish emergency mechanisms to enhance crisis response capabilities. Enterprises should establish a safety management system (such as a three-tier safety management system from headquarters to direct units to overseas institutions), develop emergency response processes for sudden events, ensure rapid response, formulate emergency plans, and conduct regular drills to effectively enhance crisis response capabilities.
Fifth, strengthen execution and supervision. Enterprises should establish an effectiveness audit mechanism for overseas risk management systems, regularly assess the effectiveness of risk management work in overseas projects and institutions. Through regular self-inspection and rectification, ensure that risk management mechanisms and measures are effectively implemented. At the same time, overseas institutions and projects should also conduct regular self-inspections to promptly identify potential risks and take immediate corrective measures for existing issues.
Finally, believe in oneself and in the country, maintain firm faith, and be courageous in the struggle. Currently, the pace of Chinese steel enterprises “going out” is accelerating, and in the transition from a “steel power” to a “steel strong nation,” similar issues may arise in the future. Enterprises should actively utilize legal means to firmly safeguard their legitimate rights and interests. We must believe that China’s rise is unstoppable, and the interests of enterprises are closely tied to the missions of national security, social progress, and national rejuvenation. In response to “robber-like behavior,” the country will always be the strongest backing. We must let the world see that China is determined and capable of protecting the legitimate rights and interests of its enterprises and defending a fair international trade environment!
Author｜Li Xiaochuan
Editor | Hao Shuhui
Reviewer | Zhang Yao
Planning | Chen Xiaoli