Chinese firms should start exporting managerial experience as well as technology

By Hu Weijia Source:Global Times Published: 2017/1/24 23:53:39

The State Grid Corp of China (SGCC) recently concluded a deal in which it took ownership of controlling stakes in Brazil's largest power distributor CPFL Energia SA. However, that is not the end of the story, but rather the beginning of another chapter in which SGCC will have to deeply ponder its overseas strategy for earning a profit in Brazil amid management problems in the country's power industry.

What this means is that China's experience in power project management will need to be introduced to the venture in addition to advanced technology and equipment. After dozens of projects built by Chinese firms, but operated by foreign companies failed to survive, some Chinese enterprises have adopted a build-operate-transfer or build-own-operate-transfer  model - which allows project proponents to operate and maintain facilities for a certain period - to finance overseas projects. Under these models, Chinese investors can make a profit through project management and can export their managerial experience to overseas markets.

One notable example is the Tazara railway in Tanzania and Zambia, which was built with the help of China in the 1970s. The railway has faced operating difficulties since 2013 and granting China a concession would inject new vigor into the project. China has accumulated valuable experience in railway operation as the country builds up one of the biggest and busiest rail networks in the world. Now Beijing hopes it can help re-energize the Tazara project by improving the management system and building an economic belt along the railway.

The SGCC should learn from these relevant experiences. The Chinese firm should not only introduce its advanced technology after it completes the takeover of CPFL Energia SA, but should also export its managerial experience to Brazil and play a role in the reconstruction of the country's power system in a bid to increase production efficiency.

China now leads the world in infrastructure investment and an inevitable result of this is that Chinese companies will begin exporting their managerial experience and industrial standards to overseas markets via outbound investment. It is foreseeable that Chinese firms may be embroiled in various disputes in overseas markets as they combine strategic infrastructure, such as power grids, railways and ports, with market appeal. The country should be prepared for difficulties as it promotes the "One Belt, One Road" initiative, but we believe that the smooth operation of projects such as SGCC's investment in Brazil will help eliminate public misunderstandings.

The author is a reporter with the Global Times.


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