Are Chinese companies getting wise to comms?

It is an article of faith among those of us seeking to assist Chinese companies with global ambitions that these corporations are reluctant to engage consultants at the strategic level.

It is an article of faith among those of us seeking to assist Chinese companies with global ambitions that these companies are very reluctant to engage consultants at the strategic level. 

Rather, Chinese companies often use professional service firms more as vendors than counselors.  Lawyers prepare filings, accountants assemble spreadsheets, and communications experts issue press releases. I have commiserated with experienced counterparts in each of these professions. We all believe we have much more to offer these companies to help navigate through the challenges of cross-border investments. 

To be sure, most Chinese companies are young and relatively inexperienced in the softer disciplines, those that are difficult to quantify. It has only been about 30 years since China moved from socialism to a more market-based economy under Deng Xiaoping. And its turn toward global commercial expansion is an even more recent phenomenon, with most occurring within the last ten years. The second-largest economy in the world, China is still largely a developing country. Think about the evolution from “public relations” to “strategic communications” in the US. The realization that the communications function is far more than simply promotion is a relatively recent phenomenon. Just as the Chinese economy is still developing, its companies' appreciation for the broader role communications plays in achieving business goals is also developing.

There are signs, however, that this appreciation is growing. Chinese companies are beginning to “get it.” Chinese investment in the US is growing every year. Much of this investment is happening without fanfare, but there are some visible exceptions. The two biggest recent Chinese acquisitions of American companies were high-profile and clearly relied on sophisticated communications strategies, not only to help complete the deal, but also to build the foundation for long-term success.

Dalian Wanda acquires AMC Theaters
In 2012, the Chinese real estate conglomerate, Dalian Wanda, announced its intention to buy AMC Theaters, America's second-largest theater chain, for $2.6 billion. While the acquisition of a movie-theater chain did not raise obvious national security concerns, some questions were raised about whether the selection of movies to exhibit ? or not exhibit — might be influenced by Chinese ownership. Wanda vowed to leave the choice of movies in the hands of the existing management of AMC. There was also a question as to whether there were any AMC Theaters on military bases. The answer was “no.”

The company made full use of its very charismatic founder and chairman, Wang Jianlin. He visited Los Angeles, Kansas City (AMC's headquarters), and Washington, DC, and was well received. In LA, he met with leaders of the entertainment industry. In Kansas City, he met with AMC staff and made a generous donation to the local school system. And, in Washington, he had lunch with a high-level group that included three former US cabinet secretaries and the president of the Motion Picture Association of America. Wang had a powerful message, committing not only to providing significant support for the struggling theater chain, but also promising further investment in the US. He was open to the media and undermined quite a few negative stereotypes about Chinese involvement in the American economy.

Wanda wisely approached this acquisition with the knowledge that any Chinese company acquiring a major American company has the potential to be controversial. Consequently, they voluntarily submitted the deal for review by the Committee on Foreign Investment in the US, the body that reviews foreign acquisition of American companies for security threats. While their lawyers assured them that such a filing was unnecessary, the company wanted the “seal of approval” from the US government. And got it. The deal was approved by CFIUS in 30 days. 

Shuanghui and Smithfield Foods
In 2013, Shuanghui overtook Wanda in making the biggest acquisition yet of a US company when it acquired Smithfields Foods, the iconic Virginia pork producer, for more than $7 billion. While this deal also steered clear of national security issues, it did become controversial. Fortunately, a smart communications strategy protected the transaction from its critics. 

For example, the day the deal was announced, there was a chorus of support expressed by local leaders in Virginia. The Virginia secretary of agriculture said, “We're looking at this as a really good thing.  China represents the grand prize, as far as pork exports are concerned.” Naysayers took a few days to assemble, but, by then, the economic benefits of the deal had been strongly communicated. Efforts to suggest that the deal threatened America's food security never took hold. Even a high-profile hearing criticizing the transaction by the US Senate Agriculture Committee failed to stop the acquisition, and it was completed expeditiously. 

Wanda and Shuanghui have showed the way for other Chinese companies seeking investment opportunities in the US. America is the largest and most developed market in the world. It is the most attractive destination in the world for foreign investment. Unfortunately, some highly visible failures of Chinese companies entering the US market have had a chilling effect on some companies' plans. They should look to Wanda and Shuanghui, as well as other successful global Chinese companies, like Lenovo and Haier, to find their path to success. They should draw the lesson that having a strong, strategic communications program can smooth the way toward successful investment in the US.

Bill Black is a senior partner at FleishmanHillard, chair of the global public affairs practice, and leads the China Practice. He writes a monthly column in the Chinese language business magazine, New Fortune.

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