Malcolm Sweeting, Senior Partner of Clifford Chance shares his thoughts on Chinese companies heading West. Malcolm Sweeting is Senior Partner of global law firm Clifford Chance.
He has been a leader of the firm’s London Banking Group and was a member of the firm’s Partnership Council. Sweeting has a widely established reputation as a finance lawyer, most recently with a focus on emerging markets. This year, Sweeting joined the CKGSB European Advisory Board.
Clifford Chance is similar to CKGSB in that it is also in the ‘knowledge business’. What knowledge is most needed among western business leaders on China?
Many Western-based global businesses have major operations in China and a very good understanding of how to succeed in China. However, that knowledge is not widespread within their organisation and for global businesses to be truly successful there needs to be a much greater understanding throughout the organisation of how to make the most of the opportunities that exist in growth markets and, in particular, China. Therefore, I see CKGSB as being ideally positioned to educate senior leadership in Western-based business organisations, both on the opportunities for doing business in China and also how the world is viewed through a China lens.
As China continues its rapid growth, it is constantly looking at opportunities that exist for it in the global marketplace. This means that all organisations involved with China have to develop a knowledge and understanding of it and keep that up-todate. It is no longer sufficient for business organisations to rely solely on their ‘China experts’ but senior managers throughout a business organisation need to have knowledge and understanding of how effectively to do business with China.
We recently saw the first Chinese law firm establish a presence in London. What advice would you offer Chinese firms seeking to ‘head West’?
Like all markets, the legal sector is impacted by the growth and success of China. We have also seen the first linkup between a leading Chinese law firm and a leading Australian law firm. My advice to Chinese firms ‘heading West’ would be to have a clear understanding of what you want to achieve and to position yourself effectively and appropriately. There are tremendous opportunities for Chinese law firms to assist their clients as they expand globally. Any investment should be seen as for the long-term, and to be truly successful requires hard work and compromise.
Competition among European countries to secure Chinese FDI is intensifying. What advice do you have for CKGSB alumni who may be considering potential suitors?
The competition for Chinese FDI is very apparent across the markets in which we operate. Whenever we talk to clients one of the areas that they focus on is Chinese outbound investment. Our lawyers who have worked in mainland China but are now based elsewhere in our international network are in great demand for their China knowledge and expertise. In a survey that we sponsored through the Economist Intelligence Unit last year, 82% of the respondents from large Chinese companies felt that they lacked management experience in outbound investment, and that they also struggled to understand local regulations and differences in culture. The feedback from this group was that this posed a challenge to their ability to expand successfully overseas.
To me, this points to the importance of very thorough preparation in advance of any deal, particularly, robust due diligence and a clear approach to orchestrating and executing the integration process.
Where there are likely to be political and/or cultural sensitivities, careful communications and engagement with the right people inside and outside the organisation you are acquiring are also critical.
What do you see as the major knowledge deficit among western SMEs about doing business with the emerging economies?
Many SMEs operate under severe resource constraints and when they start to look at emerging and rapidly developing markets, this puts them under a great deal of pressure as they often do not have the same capacity as larger organisations for allocating individuals to research the target market. On the other hand, SMEs can often be more nimble and innovative than large corporate organisations and better able to grasp opportunities as they see them. Although we are not a SME, we face some of the same issues. I would say that the greatest challenge is inculcating a good, current understanding of the growth economies across the firm. Our success in that market will ultimately depend not just on our people on the ground in Beijing, Shanghai and Hong Kong, nor even on our teams across the wider Asia Pacific region.
Rather it will depend on us being able to share effectively that same knowledge and cultural and client insights about China with our people in the US, Europe, Latin America and Africa. I think at Clifford Chance we are making great strides in this direction but it requires a great deal of investment and focus.