David Kelly’s translation of Ma Yu on Chinese investments overseas

In my 17 July post I discussed Ma Yu’s writings on Chinese investments overseas. Professor David Kelly has kindly offered to post the translation of a recent article by Ma Yu in Southern Weekend (Ma Yu, “Haiwai touzi de ‘zhidu bufu’,” Nanfang Zhoumo, 18 March 2010 [马宇： “海外投资的‘制度不服’”， 南方周末，2010年3月 18日). Here it is:

Ma Yu, ‘Institutional maladaptation’ in overseas investment

我国实际上也成了全球跨国投资新崛起的重要力量,但是制度要素的短板却因此更加凸显。

China is in reality already a newly emerging major force in global cross-border investment, but the shortcomings of its institutional factors are all the more prominent.

此短板不能补足,则我国对外投资后患无穷至今为止,我国的海外投资,仍然存在着致命的缺陷,存在着严重制约。而这种缺陷和制约,主要不在于东道国对于我国企业的歧视和限制,而在于我们自身；从我们自身来说,主要也不是资本能力、管理能力、技术水平、品牌价值等等方面与发达国家跨国公司的差距,而是在制度层面,即我们宏观以及微观上的制度弊端和缺陷。

Unable to compensate for these shortcomings, China’s foreign investments have so far constantly run into trouble, and fatal flaws and serious constraints persist in them. But such flaws and constraints don’t lie principally in the host country’s discrimination and restrictions on Chinese firms, but rather in ourselves; in our own terms, the main thing is neither the capacity of capital or of management, or the gap between the technical level, brand value, etc. of our TNCs and those of developed countries. It is rather at the system level, i.e., the macro-and micro-defects and shortcomings of our institutions.

我国经济现在最重要特点就是仍然处在转轨过程中。这意味着,市场经济的体制和规则并未完全建立,企业尤其是国有企业也并没有完全转变成为真正的市场化的企业。虽然我们说已经“初步建立了社会主义市场经济体制”,但我们都知道,这种带有中国特色的市场经济从它的基础到它的表现、从它的规则体系到它的运行主体,仍然与其它的市场经济有极大的不同——这种不同,在我们国内还可以忽略,但到了国外,却就让我们自己的企业不能适应另外一种制度环境了—— 在我们这种制度环境中诞生并且发展起来的中国企业,不管是国有企业还是民营企业,已经在骨子里带有这种制度要素的基因, 因而难以适应国外的另外的一种市场经济环境。

The most important feature of China’s economy is that it is still in the transition process. This means that the market economy system and game-rules are not fully established, and enterprises, especially SOEs, have not fully transformed into a true market-oriented enter¬prises. While we say we have “initially established a socialist market economic system”, we all know that this market economy with Chinese characteristics, from its foundation to its performance, from its system of rules to its main operation is still vastly different to other market economies—such a difference can be ignored in our country, but abroad, it renders our own businesses unable to adapt to other kinds of institutional environment—China’s firms born and raised in our institutional environment, whether SOEs or private, carry the genes of such institutional elements in their bones, making it difficult to adapt to another, market economy environment abroad.

如果说,跨国投资普遍存在“水土不服”的话,则一般来说是文化传统、思维方式和社会环境的“不服”,而外国企业到中国来投资,或者我国企业到境外去投资,这种“不服”又增加了“制度不服”。

If we say that widespread cross-border investment, “inability to adapt”, then it is generally cultural traditions, ways of thinking and the social environment, “dissatisfied,” while foreign enterprises to invest in China or overseas Chinese enterprises to invest in this “ not agree with, ”added“ system not agree with.”

于是我们看到,我国的一些优秀企业,在进行海外投资时,犯了颇多不可思议的小儿科或者说是常识性错误。 TCL海外投资所犯的错误,难道仅仅是因为李东生个人的阅历和见识缺陷吗?收购一个过气的品牌,仅仅是因为对于这个品牌和对于国际市场的判断不准吗?

So we see that some of our finest firms have committed many incredibly childish errors, errors of common sense, when investing overseas. Were the mistakes in TCL overseas investment due simply to flaws in Li Dongsheng’s personal experience and insight? Did they acquire some has-been brand simply because their judgment about this brand and its international market were inaccurate?

为何收购的主要动机之一是为了对方的技术和研发力量,到最后研发人员却成了收购的最大包袱和收购失败的根源, 以至于不得不付出更大代价进行剥离? 难道仅仅是因为对于东道国的劳工法不清楚吗?

Was the target’s technical and R&D strength one of the main motives for acquisition, but in the final result, R&D personnel became the M&A’s largest burden and the source of its failure, to the extent that a higher price had to be paid to strip them off? Was it simply because of ignorance of the host country’s labour laws?

我不相信我们的企业在进行海外并购的时候会不做可行性研究,但我同时也不相信我们的企业会认真地进行可行性研究评估,从而对于并购对象有清晰准确的认识和判断,在这基础上做出是否值得并购的决策,并制定有效的并购整合方案。其中的理由也很简单———在我们国内,不管是国有企业还是民营企业,不管是那些优秀的企业还是失败的企业,有几个不是拍脑袋进行投资决策的?我在多年的中国经济研究中接触了数以百计的国内外企业以及大大小小的企业家,国外跨国公司和国内企业对于可行性研究的基本态度明显有天壤之别:跨国公司(尤其是欧美日的,华人跨国公司有所不同)对于可行性研究的态度近于古板、苛刻 我们中国人以为是显而易见根本不需要再做研究的,他们也要找出绝对的支撑依据才会认可,因而都会根据项目投资规模的大小拨出一定比例的专门经费进行严格、科学的可行性研究；而我们国内的绝大多数企业(官员、企业家)对于可行性研究是颇不以为然的,甚至基本认为是浪费资金、贻误战机。

I’m sure our enterprises do carry out feasibility studies for their overseas M&As, but I’m also sure they don’t do them carefully, or gain a clear and accurate understanding of and judgment about the objects of M&A, or decide whether the M&A is worthwhile on this basis, or formulate effective merger integration programs. The reasons for this are simple: in China, what firms—state-owned or private, good or failed—are not in a frenzy to come up with investment policies? Studying the Chinese economy over the years I’ve made contact with hundreds of domestic and foreign enterprises and small and large entrepreneurs. The basic attitudes of foreign multinationals and domestic enterprises towards feasibility studies are clearly worlds apart: the attitude of transnational corporations (especially Europe, American and Japanese: the Chinese MNCs are different) towards feasibility studies borders on being rigid and strict, whereas we Chinese think it obvious that no further research needs be done; they will approve it on finding absolute support, and hence a certain percentage of special funding will be set aside for strict, scientific feasibility studies based on the on the scale of the investment project; while for the vast majority of domestic enterprises (government officials, entrepreneurs) in China find feasibility studies quite objectionable, and in fact see them as basically a waste of money and strategic opportunity.

绝大多数的中国企业家,尤其是那些在国内市场上颇为成功的企业家,从来都是相信自己的所谓“直觉”和“市场敏感”,而不会相信严谨的可行性研究。或许很多人以为这是中国市场竞争的低层次导致的———不用做可行性研究进行投资决策的成功率也很高,但我认为更多的还是制度原因。

The vast majority of Chinese entrepreneurs, especially those who have been successful entrepreneurs in the domestic market, have always believed in their own “intuition” and “market savvy”, and do not believe in rigorous feasibility studies. Many people may think this is caused by the low-levels of competition in China’s markets—the success rate of investment decisions that do not bother with feasibility studies is quite high—but I think more or institutional reasons.

国有企业不用做或不真做可行性研究可以理解,因为至今为止国有企业的改革也没能解决内在的根源,长官决策或者行政决策代替市场决策很正常；民营企业不重视可行性研究似乎说不过去———毕竟那是他们自己的钱。

SOEs failing to do (or really do) feasibility studies can be understood, because the reform of SOEs has so far failed to address the internal root causes. It’s quite normal for market decision-making to be replaced by CEO or administrative decision-making; whereas it makes little sense to talk of private enterprises attaching no importance to feasibility studies—after all, it’s their own money.

可是,他们的科学决策能敌得过政府的行政审批吗?在我国现行投资管理体制下,稍微重要一点的项目都需要通过政府的投资审批,而审批的标准又是模糊的、弹性的、多变的,企业无从把握。有时候,企业的可行性研究做得再好,政府依然可以以“不可行”这种放之四海而皆准的理由予以否决,一个毫无市场经验的官员否决众多专业人士做的项目报告的情况比比皆是；而只要企业的决策与政府的爱好相吻合或者遵循了“潜规则”,那么再不可行的项目都可以获得批准———此种情况导致的最终结果是,不仅国内企业,即使外商投资企业,要想获得政府批准也得把“可行性研究报告”做成“可批性研究报告”。

However, can their scientific decision-making withstand government administrative approval? Under China’s current investment management system, slightly more important projects require government investment approval, but the criteria of eligibility are vague, flexible, changeable, and beyond companies’ ability to grasp. Sometimes, no matter how well a firm has done a feasibility study, the Government may still reject it on the one-size-fits-all grounds that it is “infeasible,” and it is far from uncommon for an official with no market experience to reject a project report done by professionals; and as long as the firms decision-making is consistent with the government’s likes and dislikes, or follows the “hidden rules,” then even blatantly infeasible projects will be approved—The final result of all this is that not only domestic enterprises, but even foreign-invested enterprises, in order to be approved by the Government, turn their “feasibility studies” into “approvability studies.”

试想,长此以往,哪个中国企业和中国企业家还会真正重视可行性研究?如此的思维惯性和操作模式,到了国际市场,进行跨国投资,犯那些常识性错误,不是很正常的吗?我们的企业和企业家,在国内市场不重视可行性研究,毕竟还可以利用自己的“企业家直觉”和对于我国制度环境的基本认识来进行决策,结果也不至于太离谱；即使犯了错误,代价也是有限的或者是可以弥补的。而到了国外,这些错误很可能就是致命的。

Imagine, in the long run, which Chinese companies and Chinese entrepreneurs will genuinely focus on feasibility studies? If one undertook cross-border investment in the international market with such intellectual inertia and operating mode, wouldn’t one expect to commit errors of common sense? Our firms and entrepreneurs attach no importance to feasibility studies in the domestic market: they can after all use their own “entrepreneurial intuition,” and market decisions based on their basic understanding of China’s institutional environment with reasonably accurate results; an even if mistakes are made, the cost can be contained or made up for. But these errors may well prove when overseas.

比如让中国企业在海外投资中一再栽跟头的劳工问题,就是一个典型例子: 在我们国内,我们的企业会如此受制于雇员吗?我们的工会都是企业的附属机构,怎么会像国外那样跟老板作对呢?我们的法律,虽然也保护劳工权益,资方不能随便解雇员工,但众所周知,雇员与企业完全不可能平等博弈,基本还是想解雇就解雇,即使付出代价也很小,哪会像在国外那样让工会把老板逼疯、让雇员把企业拖死?这种既定制度导致的思维惯性和行为模式已经根深蒂固,是不会随着中国企业到境外去投资制度环境发生变化而马上消失的,必然还会延续国内的惯性,所以一而再再而三的失误就不可避免。

For example the labour issue, which has constantly led Chinese enterprises come a cropper in their overseas investment, is a typical example: in this country, how could firms ever be so restricted by their employees? Our unions are subsidiary agencies of the corporation, how could they oppose the boss as happens overseas? Our laws also protect labour rights, [so that] employers can not arbitrarily dismiss employees, but as we all know, employees cannot play the game on equal terms with the enterprises, who can basically dismiss them if they wish, even if the price paid is very small, how could it resemble what happens in foreign countries where trade unions are allowed to drive the boss crazy, and employees drag enterprises to destruction? The intellectual inertia and behavior patterns of such a well-established system have become entrenched. They won’t disappear the moment Chinese enterprises change their institutional environment by going overseas to invest: they will necessarily extend the domestic inertia, making it inevitable that they make endless mistakes.

诚如葛优所言,21世纪最重要的是人才。但我们需要追问一句:人才从哪里来?从好的制度里来。中国人的聪明才智毋庸置疑,但近年来科技水平的下降和高水平人才的缺乏却让人气沮、疑惑乃至愤怒。我国级别最高、官至国家领导人的科学家钱学森临终问的“我们的学校为何培养不出优秀人才”,对于我们这样一个拥有悠久文明、历史上人才辈出的人口大国来说实在是个莫大的讽刺。

As Ge You said, the most important thing in the 21st century is talent. But the question must be asked: where does human talent come from? It comes from good institutions. There is no doubting that Chinese people are intelligent, but in recent years, the decline in S&T standards and lack of high level talent has been discouraging, puzzling and downright infuriating. China’s most eminent scientist, Qian Xuesen, who rose to the rank of state leader, asked on his deathbed, “Why are our schools unable to produce talented people?” This is a great irony for us in this country with such an ancient civilization and with greatest number of talented people in history .

综观人类历史,冷兵器时代比的是勇气和力量,现代战争比的是战略和技术,市场经济竞争比的却不仅仅是人力、资本、技术、产品、资源等等物质要素,更比的是制度要素,国与国之间的竞争基础更主要的是制度。制度可以集聚资源、利用资源,比如日本；制度可以培养人才、吸引人才,比如美国；制度也可以浪费资源、毁灭资源、压抑人才、窒息人才,我国三十多年制度性的改革开放释放出了推动经济持续高速增长的生产力,而我们过去以及今后存在的发展问题,也依然可以找到深刻的制度根源。

In the perspective human history, courage and strength were what counted in the age of cold steel; but strategy and technology are what count in modern warfare. What counts in market economic competition is not simply material elements such as manpower, capital, technology, products or resources, but institutional elements. What counts in competition between nations are institutions. Institutions can gather and use resources, as in the case of Japan; institutions can develop and attract qualified personnel, as in the case of the United States; institutions can also waste and destroy resources, and suppress and suffocate talent. Our 30 years of institutional reform and opening up released productive forces that promoted sustained and rapid economic growth; but deep institutional roots can be found as well for problems in our development that existed in the past and present.

如今,随着我们国力的增强,我们确实已经具备了对外投资的某些生产要素,比如2.4万亿美元的外汇储备,我国实际上也成了全球跨国投资新崛起的重要力量,但是制度要素的短板却因此更加凸显。此短板不能补足,则我国对外投资后患无穷。

Today, with our increasing national strength, we actually have in place some production factors for foreign investment, such as 2.4 trillion in foreign exchange reserves,  China has become a newly rising major force in global cross-border investment, but the shortage of institutional elements has thereby become even more prominent. If it cannot be made up for, China’s foreign investment will be in endless trouble.

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