China Inc.

by Steve Chu

When audiences were sitting the AMC Theater enthralled by Indominus Rex battling T-Rex in Jurassic World, few know that they are watching—at least on paper—a Chinese movie. Fewer would even know that they were sitting in a Chinese theater. And that’s because China’s Dalian Wanda Group owns both AMC Entertainment and Legendary Entertainment (producer of Jurassic World as well as Inception). When world leaders come to New York and stay in the storied Waldorf Astoria, they are in fact staying in a Chinese-owned hotel. Anbang, a large Chinese insurance conglomerate, purchased Waldorf Astoria in 2015.

China’s gross domestic product (GDP) is US$11.3 trillion, second behind only to the United States’ $18.5 trillion. Many people and companies continue to talk about entering the world’s second largest market, as Google and Facebook are still trying. While it is valid that Western companies are still seeking ways to find their footprint in China, it is a dated narrative.

In recent years, Chinese companies have been on a tear to acquire foreign companies. Qingdao Hair Co. spent $5.6 billion to acquire GE Appliances. Ingram Micro, with $43 billion in sales of IT products and services, was purchased by Tianjin Tianhai, a part of the Chinese conglomerate HNA Group. HNA also spent $4.49 billion for a 25% stake in Hilton. And this is just in 2016.

The list goes on and on, and doesn’t even include serious acquisition attempts made by Chinese companies that did not result in deals. For example, Anbang tried unsuccessfully to acquire Starwood Hotels (Sheraton) last year. Starwood Hotels was eventually acquired by the Marriott International.

China is also pushing for its currency, reminbi (RMB), to be a major currency used in international finance and trade. Its lobbying efforts stretched back for years and have recently begun to pay off.

In 2015, the International Monetary Fund (IMF) designated RMB as a main world currency, joining an elite group of four other currencies with that designation—the dollar, the euro, the pound, and the yen. Then in September 2016, the IMF accepted RMB as a reserve currency. 

In 2014, China also led the way to create the Asian Infrastructure Investment Bank (AIIB), even though there is already a development bank in existence in Asia already, the Asian Development Bank (ADB). The ADB is dominated by Japan, which has double the voting share as China. Dating back to the establishment of the IMF and the World Bank in 1945, there has been an informal agreement that the head of the IMF will be an European national and the head of the World Bank will be an American national. With the AIIB, China is obviously seeking to assert itself as an economic power and change the dynamics of international trade and finance.

The point, of course, is that the economic landscape is changing. And even with the Chinese government tightening the grip of outflow capital, expect this to be a long-term trend.

Steve Chu is the President of Treehouse Strategy, a management consulting company specializing in international growth and #growthhack.

Steve is an entrepreneur, China watcher, author, and a frequent speaker in international conferences. He is passionate about #growthhacking, business model innovation, and international marketing. 

Contact him at [email protected] or @TreehouseG11N