China's Startups (Photo : Getty Images)
China’s startups have started to come out to expand overseas in the new phase of the Going Out Movement, a plan initiated by China in the late 1990s aimed at encouraging companies to go abroad to raise outbound investments.
The new phase of this plan is also expected to improve the country's economic competitiveness and alter the perception about products labeled Made in China, according to a CNBC report.
Analysts said that the wave of Chinese startups' going global is part of efforts to improve the country's position in the global value chain.
In the early stages of the policy, state-owned enterprises and big Chinese firms expanded their business presence overseas through mergers and acquisitions, which included ChemChina's takeover of Pirelli and Lenovo's acquisition of an IBM unit, among others.
The new phase, led by Alibaba and Tencent, involved startups and private companies who wanted to spread their economic influence across the world and believed that technology and innovation should transcend borders.
"We are very much a Chinese company and China is a big market, but the adoption of new technology and new products like ours may be faster in other markets so we shouldn't confine ourselves," Wang Mengqiu, founder and chief executive of Zero Zero Robotics, said.
Since 2014, Wang's company has been doing business in the U.S. and China. Their first product is an autonomous flying camera which has been sold globally and now in Apple stores in the U.S., the UK, Canada and China.
Global test of capability
Analysts said that most of the startups believe that the global marketplace is a test of their capability and endurance, and if they survive, they gain not only better financial returns but credibility as well.
Neil Wang, global partner and China managing director at Frost & Sullivan, said that startups that go abroad also want to show the world their new business concepts and they are interested not only in acquiring stakes in foreign companies.
"The international development of startups is accompanied with demonstration of high-tech products, which shows the world that 'Made in China' products are also innovative and user-friendly," Wang said.
The new trend is expected to boost China's outbound investment and strengthen its position as a major exporter of capital and innovation, the report said.
Data from the National Bureau of Statistics show that the country's non-financial outbound investments grew from $5.5 billion in 2004 to $170.11 billion in 2016. According to economic researchers, this trend will continue in the coming years even with the country's curb on capital flight.
"Chinese enterprises have begun to rapidly increase their global investment to achieve mid- to long-term growth. With the 'One Belt, One Road' initiative and other strategies serving as a powerful engine, more Chinese enterprises are expected to invest overseas and, therefore, a double-digit growth rate in China's outward [foreign direct investment] is expected in the next few years," Loletta Chow, global leader of EY's China Overseas Investment Network, said in a report.
China as key growth market
But despite their successes abroad, most Chinese companies, including startups, still consider China as a key growth market.
"It's important for us to continue being in China. There is a lot of tech talent in China and the lower operating costs here means that we get a longer runway with the amount of investments that we get. Being in U.S. and China is having the best of both worlds," Wang from Zero Zero Robotics said.
"We are continuing to innovate and succeed in China, and bringing what we have learnt to overseas markets. It will always be a key market for us, as we need to continue iterating on our business model for it to be a long-term, sustainable one," a Xiaomi spokesman said.