Loco about Localization: The Obvious is Not for Chinese Companies

Dr. Jean-Marc F. Blanchard's picture

It is de rigueur today that Chinese companies need to become more localized. At a minimum, they need to become more aware of local laws, regulations, and customs and abandon the idea they can do things like they do them at home. At the maximum, they need to hire more local workers and managers, source more goods locally, transfer technology, and become better corporate citizens, adopting meaningful corporate social responsibility programs.

Failing to do these things, they risk worker anger, a backlash from host country publics and governments, and even violence against their property and overseas executives. Top Chinese elites like the Chairman of the National Committee of the Chinese People’s Consultative Conference repeatedly have encouraged Chinese firms to “bring benefits to local people and pursue win-win cooperation.” While there is much to do, there is no shortages of initiatives. For instance, China Railway and Bridge Corporation has purchased USD $235 million in local goods and services in Kenya and helped the country develop an indigenous cement production capability. In Botswana, Ghana, and South Africa, Huawei and others have sponsored student awards, e-Libraries, and schools. Localizing, though, is not as an obvious choice as it may seem. Localizing workers and managers could be politically counterproductive if it leads a Chinese firm to deliver poor quality and services. As well, localizing government relations may be dangerous if it involves the payment of bribes or getting into bed with vulnerable, despotic rulers. Furthermore, localizing host country social norms may undermine a firm’s global image if those norms are viewed as discriminatory in the firm’s other major markets. Lastly, localization may be environmental unfriendly depending upon how localization reshapes production inputs. Ultimately, localization is not a maxim, but a choice. Chinese firms should be careful about replacing one set of blinders with another.