Building trust: the key element in overseas expansion

Author and entrepreneur Chris Pereira discusses the importance of trust

As Chinese companies accelerate their global expansion, success increasingly depends on more than competitive products and manufacturing strength. Building trust with consumers, regulators and business partners has become a critical factor in navigating overseas markets. Chris Pereira, founder and CEO of global consulting firm iMpact and author of Trust: The Golden Key to Chinese Enterprises’ Globalization, speaks with CKGSB Knowledge about why trust has emerged as a strategic advantage, the challenges Chinese companies face abroad, and what it takes to build truly global brands.

Chinese companies are expanding overseas faster than ever. What is the biggest misconception Chinese executives have about succeeding in foreign markets?

The biggest misconception is that operational excellence translates automatically into market acceptance. Chinese executives are extremely proud, for good reason, about China’s supply chains, product specifications and pricing models. Unfortunately, however, those advantages are only half the battle.

I saw this repeatedly during my time at Huawei, where technical superiority was treated as the primary argument in markets where the real gatekeepers were government relations, local media and community perception. Success overseas depends on winning belief before you win business, and belief is built through relationships, transparency and time, not product specifications. Executives who treat globalization as an extension of their domestic playbook consistently underestimate how much of the buying decision sits outside the product itself.

In your recent book, Trust, you talk about the belief that superior products and competitive price are not enough to win overseas. Why is that no longer sufficient?

In its first 30 or so years of reform and opening up, product quality and price was the entire contest for China, and Chinese companies were built to win exactly that contest through scale and manufacturing discipline. What changed in the past decade is that international buyers, regulators and consumers now factor in questions that have nothing to do with the product itself: data governance, labour standards, environmental practice and the political relationship between their country and China. Add to this that Chinese companies are not just manufacturing and operating inside China anymore; they have subsidiaries, teams and even manufacturing bases in countries around the world. Having international operations also adds a layer of complexity beyond product and price: it adds local trust and relationships, which can make or break a business if handled poorly.

My book argues that trust functions as a multiplier sitting at the foundation of product and price. Without it, even a well-engineered product gets discounted, delayed or blocked entirely, which is exactly what has happened to many Chinese technology companies over the past decade.

What are the reasons for there being a trust deficit towards Chinese companies? To what extent is there still a lack of trust towards Chinese companies in the West, and what does trust actually mean here?

We are at the beginning of a new era in business for China and the world. In the early years of China’s reform and opening up, the focus was primarily export, which meant that only rarely would business be conducted outside of China. Normally buyers of Chinese goods would come to China and experience China, rather than Chinese businesspeople going overseas.

As a new wave of Chinese businesses expand overseas, they are learning through trial-and-error, sometimes leaving broken promises or disappointed potential business partners in their wake.

In addition to this, there is also the legacy of the copycat era, when Chinese factories were associated with counterfeit goods and shortcuts rather than original engineering. This era still lingers in older consumers’ memory even though the manufacturing base moved far beyond that years ago.

The perceived opacity of the relationship between private enterprise and the state also creates genuine uncertainty for foreign regulators who cannot verify where corporate decision-making ends and government influence begins. Connected to this, geopolitical competition between Beijing and Washington has turned ordinary commercial activity, from telecom equipment to social media apps, into proxies for a larger strategic rivalry. None of these forces are really about the quality or legal compliance of Chinese products, which is why improving the product alone will never resolve the trust problem.

In my book, I differentiate between different types of trust in society. The trust deficit for Chinese companies is real but it has become uneven, and it helps to separate consumer trust from institutional trust because the two are moving in opposite directions.

At the consumer level, young shoppers use Midea appliances, TCL televisions, DJI drones, Shein’s app and TikTok every day without connecting the product to its country of origin, which tells me that functional consumer trust has largely been earned.

At the institutional level, meaning governments, legislators and security agencies, the deficit remains deep and in some cases has hardened, visible in the restrictions placed on Huawei’s 5G equipment across the United States, United Kingdom, Australia and other markets over the past several years. Trust here breaks into three parts: competence trust that the product works as promised, values trust that the company operates by standards you recognize, and relational trust that the company will still be there for you in five years and not just at the point of sale. Chinese companies have made real progress on the first and still have work to do on the second and third.

Can you cite any examples of Chinese companies that have been the most successful at building their brand’s trust overseas, and what lessons can be learnt from them?

In my mind, Lenovo is probably one of the clearest examples of a successful brand from China. When it acquired IBM’s personal computer division in 2005, it kept the ThinkPad brand, retained IBM’s global sales and service network, and moved its own headquarters structure to include a base in the United States rather than running everything out of Beijing. Haier followed a similar path when it bought GE Appliances in 2016, keeping the headquarters in Louisville, retaining the GE brand under license, and giving the American management team real authority to run the business using its own instincts about the US market.

BYD is following a similar path but without the benefit of acquiring foreign brands as a “trust anchor”. They are building trust locally by setting down roots overseas, including by establishing manufacturing plants in Hungary, Brazil, Thailand and Indonesia rather than only exporting from China, and opening a European headquarters in Hungary to localize sales, certification and design. The lesson across all three of these examples is the same: local credibility gets built through people and physical presence.

And likewise can you cite any examples of companies that despite having good products, have not been successful at building trust?

Huawei is the example I know best, having worked there directly. By any technical measure it built world leading 5G equipment, yet it has been banned or restricted from telecom networks in the United States, United Kingdom, Australia, New Zealand, Japan, Sweden, and a growing list of European countries over the past several years.

During the years I was with the company, Huawei invested heavily in security audits and transparency centers to prove its equipment was safe, but by the time it made those efforts the trust deficit had already hardened into policy and legislation, which technical evidence alone cannot reverse. ZTE faced a nearly identical pattern for the same underlying reason. Both cases show that once a product gets classified as a national security question instead of a commercial one, engineering excellence stops being the deciding factor and government relations becomes the primary lever left to pull.

To what extent does localization of the company and the perception of the company work in terms of offsetting the trust problem?

Localization solves the operational layer of trust quickly. A company that hires local staff, adapts its product to local tastes, and builds a visible community presence can win over customers and even regulators on functional trust and values-based trust within a few years. What localization cannot fully solve is the structural layer, meaning questions tied to ownership, governance and the relationship between a company and the Chinese state, because those questions live above the local subsidiary and get decided in national capitals rather than local offices. This is why a company can be excellent at localization in one market and still get caught in a geopolitical decision between nations. Localization closes most of the functional and values trust gap, but a meaningful remainder stays beyond any single company’s control because it depends on the diplomatic relationship between governments, not on how well the business behaves in a given market. At a higher level, trust between nations needs both time and wisdom on the part of national leaders on both sides.

What are the biggest cultural mistakes Chinese executives make when managing overseas teams? Many Chinese companies talk about localization. In practice, what separates genuine localization from simply opening a foreign office or factory?

The most common mistake is transplanting a headquarters first decision culture onto a team that expects local autonomy. This is especially true if a Chinese company is entering a local market through a localization, such as NineBot did when acquiring Segway. The company acquired the wildly successful brand, but soon found its local talent slipping away due to poor local management and top-down directives from HQ in China.

Many Chinese executives grew up in organizations where major decisions flow upward for approval, and when that habit gets exported wholesale, local hires quickly conclude that their judgment is not trusted and start looking for the exit.

A second mistake is rotating Chinese expatriate managers too frequently, which prevents the kind of sustained personal relationships that Western employees and partners expect to see over time. Huawei was also guilty of this practice, though their reason for cycling management through has a good reason at its heart: to prevent internal corruption from overseas managers being in one place for too long, Huawei will rotate management to different regions every few years. The sacrifice is local connection and local trusted relationships.

An extension of these management issues is an underinvestment in employer brand and team-building, treating local hiring as a transaction rather than building a reputation as a good place to build a career, which later shows up as high turnover and difficulty recruiting senior local talent. I have watched all three mistakes play out inside companies I have advised, and they are almost always fixable once leadership recognizes the pattern. But the longer the management issues persist, the worse a brand’s local reputation gets, until it becomes functionally impossible to hire quality talent in the local market, forcing a vicious cycle where HQ must then send more staff from China to run the local operations.

Genuine localization is a governance decision, and the test is simple: does the local team control its own profit and loss, its own hiring and its own marketing message, or does every meaningful decision still route back to headquarters in China. A second test is leadership. If the most senior person in a market is always a Chinese national reporting to Shenzhen or Shanghai, with local hires capped below a certain level, the market will read that as a glass ceiling regardless of how the press release describes the investment. I often tell clients that the physical footprint (the office) is the easiest and least meaningful part of localization to build.

Looking ahead over the next 5-10 years, what companies do you see as being the most successful in becoming truly global brands?

Off the beaten track a bit, I personally think Mixue’s new brand Lucky Coffee has a real chance of breaking into overseas markets in the coming years, giving Luckin Coffee a run for its money – even in China.

In addition, BYD is setting down great foundations for local growth globally. It’s also likely that a Chinese robotics company or two will jump onto the world stage in the coming years, beyond dance routines, and begin offering things like hotel room cleaning service, road cleaning, window cleaning or other B2B services that the West currently would greatly require. These types of services will only be successfully deployed by the next generation of Chinese companies that remain dedicated to building trust in local markets around the world.