Chinese and foreign enterprises explore dual strategies under Belt and Road framework
‘Going global’ and ‘bringing in’ under BRI
Published: Apr 29, 2019 05:50 PM

Technicians work on a production line at Pirelli's branch factory located in Yanzhou, East China's Shandong Province. Photo: Courtesy of Pirelli

Zhu Lianyu, president of Shanghai Zhenhua Heavy Industries Co (ZPMC), was excited about the company's largest contract so far this year: a $500 million project signed with the Port of Singapore Authority (PSA) at the Belt and Road CEO Conference on April 25.

Although ZPMC has a global market share of more than 70 percent in the port machinery sector and has been number one for 21 years in a row, it is not easy to win bids overseas, Zhu explained, noting that the Belt and Road Initiative (BRI) has provided more opportunities for Chinese companies to go global.

"Given the critical geographical location of Singapore, this project with PSA will become a model for products and services carried out by China in BRI countries and regions," Zhu told the Global Times Thursday.

"The project with PSA is a fully automated port, and we need to build 28 quayside bridges and 78 field bridges for the project," Zhu said.

In addition to the $500 million PSA project, ZPMC also signed an $80 million contract with Israel TIL port Thursday.

"Israel is a relatively new market for us, yet a picky one. It has strict requirements in technology and products, as well as in advanced services and manual facilities. The newly signed TIL port project is a great promotion of our partnership with Israel under the BRI framework," Zhu added.

Going global

In the autumn of 2013, Chinese President Xi Jinping proposed the building of the Silk Road Economic Belt and the 21st Century Maritime Silk Road - the Belt and Road Initiative for short.

The BRI has extended from Asia and Europe to Africa, the Americas and Oceania, opening up new space for the world economy with better-than-expected results, Xinhua said on Sunday, adding more than 150 countries and international organizations have signed BRI cooperation documents with China.

In the past six years, China has signed 173 cooperative documents with 125 countries, including developed and developing countries, and 29 international organizations, Yuan Da, spokesperson with the National Development and Reform Commission, told a press briefing Thursday.

The goods trade volume between China and countries and regions involved in the BRI exceeded $6 trillion from 2013 to 2018, according to the Ministry of Commerce (MOFCOM) in April. 

China's outbound direct investment into BRI countries is also increasing.

Data from MOFCOM showed that non-financial direct investment by Chinese enterprises in countries along the BRI surpassed $90 billion with an average annual growth of 5.2 percent.

The newly signed foreign projects surpassed $600 billion with an average of 11.9 percent annual growth. Chinese enterprises have developed a number of overseas economic and trade cooperation zones in countries along the BRI, with a total investment of more than $30 billion so far, MOFCOM said.

These zones have become important platforms for local economic growth and industrial agglomeration, and have brought nearly 300,000 jobs to host countries, according to MOFCOM.

According to ZPMC's statistics, the company has provided more than 3,500 sets of equipment for 52 countries and regions related to the BRI. 

In an interview with the Global Times, Zhu introduced ZPMC's unique secrets about "going global" and emphasized that every bid overseas is hard-won. 

"The essential element of winning a bid is the ability for continuous independent innovation, which is the core advantage of ZPMC," Zhu said, "The contract with PSA Tuas port involves a newly built research and development institute to come up with better solutions to the problems that perplex PSA."

Zhu further noted that ZPMC can meet users' personalized and customized requirements. "With our own unique transportation fleet, we can guarantee the delivery of equipment to the destination required by our customers on time," Zhu said.

ZPMC also has large-scale production ability. Normal-sized construction companies would have a hard time completing a mega project like the port ZPMC signed with PSA, which will have 64 berths and annual throughput of up to 60 million TEUs (Twenty-foot Equivalent Unit), Zhu explained.

Bringing in

The BRI's momentum has been powered by the strategies of "bringing in" and "going global." In addition to going global, China has also taken measures to attract foreign investment and promised more market openness and wider cooperation in innovation.

One example of the "bring in" strategy was the acquisition of Pirelli Corporate, a well-known tire producer founded in Italy in 1872, by China National Chemical Corporation (ChemChina), together with the Silk Road Fund and other stakeholders in 2015.

It was the first investment and acquisition project by the Silk Road Fund in a high-end manufacturing industry in a developed country. 

Over the past three years, ChemChina has advanced the development of Pirelli's new technology, products and services in China using its experience and resources.

Filippo Maria Grasso, corporate vice president for institutional affairs at Pirelli, took up the post of CEO at China National Tire and Rubber Co, a subsidiary of ChemChina, in May 2018.

Introducing Pirelli to China is in line with China's current economic policy background, Filippo said.

He told the Global Times that Pirelli has built three factories in China with 4,000 employees and become a leader in the field of ultra-high-end tires. 

Since China is the most important market for high-end and ultra-high-end car sales in the world, many innovative technologies have been concentrated in the country, which has vital strategic significance for the growth of Pirelli's high-value business, he said.

The strategy adopted by ChemChina and Pirelli embodied the shared-interest development model advocated by the BRI, in which both sides could benefit from the cooperation, Filippo noted. 

China started piloting national smart city development in 2012 to encourage use of new technologies, such as AI and Internet-of-Things, to help traffic flows, improve law enforcement and make public buildings more energy efficient, according to Xinhua. 

Filippo pointed out that Smart Mobility would be a new sustainable mode of urban traffic, which is characterized by the vigorous development of electric vehicles and a shift to automatic driving.

Tires will play a key role in smart mobility information collection, Filippo said, adding that Pirelli has developed an integrated digital system and a "smart tire" that can communicate directly with cars and provide the best riding experience for end users.

China and Italy signed a memorandum of understanding to jointly advance the construction of the Belt and Road in March, according to reports by Xinhua. 

Since Italy formally joined the BRI, the case of Pirelli and ChemChina has become the focus of the two countries' future cooperation projects, Filippo said.

Filippo said he has seen the cooperation between ChemChina and Pirelli as not only a success in industrial development or business profit, but also a great example of promoting BRI cooperation.