Chinese companies are riding a new wave of "going global," driven by a strong enthusiasm to expand into overseas markets, targeting regions like Africa, South America, and North America. However, hidden beneath this wave is a profound contradiction between growth and costs. ANBOUND's founder Mr. Kung Chan raised a thought-provoking point during the 2025 Trend Seminar, that Chinese companies going global must make a choice between "growth" and "cost". High-growth markets like Africa may offer rapid growth, but they come with enormous risks. In contrast, developed country markets are vast with stable returns, but the costs are higher, making them more suitable for companies aiming to "grow bigger and stronger". Mr. Chan warned that it is improbable to have both ways and that attempting to take advantage of both sides is not feasible. Growth and cost are inherently difficult to balance, and before going global, companies must carefully consider their positioning and what trade-offs they are willing to make.
The crisis triggered by BYD's factory project in Brazil is a typical example of failing to properly balance growth with costs. As the largest economy in South America, Brazil offers immense potential in the new energy vehicle market, making it a key target in BYD's global strategic layout. However, such high-growth markets also come with significant risks. According to a statement from the Brazilian Labor Prosecutor's Office, BYD's contractor, the Jinjiang Group, severely violated labor laws: workers faced excessively long hours, poor living conditions, and even had their passports confiscated. These actions were deemed "slave-like conditions", sparking a strong social backlash in Brazil. While BYD quickly responded by terminating its contract with the Jinjiang Group, its response in China was to avoid addressing the core issue, attempting to shift the focus by claiming it was a smear campaign by "hostile forces". However, this response did not quell the controversy but further damaged the brand's image.
BYD's management failure has not only harmed the company's own interests but also impacted China's national image. The most fundamental principle of corporate management is to respect and take care of employees. During China's most difficult times, the country still provided workers with clothing allowances and diplomatic etiquette training to maintain national dignity. However, today, some Chinese companies expanding abroad are attempting to cut costs, resorting to questionable practices, neglecting basic management principles, and putting workers' legal rights at risk. This is not only a failure in corporate management but also a blow to the country's reputation on the global stage.
Similar issues also occurred at Fuyao Glass's U.S. factory. Fuyao tried to implement its highly efficient Chinese-style management model in the U.S.but overlooked the importance American workers place on labor rights and union culture, leading to escalating management-employee conflicts. The documentary American Factory showcased Fuyao's lack of cultural adaptation, which sparked public criticism of "Chinese-style capitalism". Fuyao's experience highlights that entering developed markets comes with higher costs, and that only by respecting the cultural differences of the target market and adhering to local laws can a company achieve long-term growth. Ignoring these issues not only fails to save costs but can also lead to greater hidden costs as conflicts escalate.
Mr. Chan's perspective reveals the core challenges faced by companies expanding abroad. High-growth markets such as Africa and South America, while offering tremendous growth potential, come with high risk and cost. Meanwhile, developed markets like the U.S. and Europe, though more stable in terms of regulations, have high entry costs. Blindly pursuing growth or overly focusing on cost-cutting can lead to significant costs for companies expanding overseas. More importantly, when Chinese companies expand abroad, they not only represent themselves but also carry the image of the nation. Companies going abroad must not only pursue profits but also fulfill their responsibilities to employees, society, and the country.
This means Chinese companies expanding abroad must abandon a "shortcut-taking" mentality, as fulfilling basic responsibilities is more important than anything else. If a company cannot even guarantee basic labor rights and management standards, how can it talk about brand building and long-term development? Some companies, in an effort to cut costs, have taken the misguided path of exchanging short-term gains for long-term costs, which not only plunges the company into crisis but also forces the country to bear reputational damage. As Mr. Chan stated, companies expanding abroad must clarify their growth objectives while adhering to bottom-line management and making sound risk predictions.
The balance between growth and cost is a constant challenge for Chinese companies expanding internationally. As they pursue growth, these companies must also confront the realities of costs and ensure they maintain strong management practices and cultural adaptation. In high-growth markets, understanding and managing risk is crucial, while in developed markets, a careful approach to cost is essential. Expanding abroad is a key step in the globalization of Chinese companies, but it is not without its difficulties. Byplanning ahead, taking responsibility, and strategically balancing growth with cost management, companies can achieve sustainable success on the global stage.
Final analysis conclusion:
The international expansion of Chinese companies is a delicate balance between growth and cost. High-growth markets offer tremendous potential but come with significant risks, while developed markets have stable rules but higher entry costs. The cases of BYD and Fuyao Glass demonstrate that blindly pursuing growth or overly focusing on cost-cutting can lead to costly consequences, affecting both business interests and China's national reputation. Companies expanding abroad must set clear objectives and uphold their bottom lines, i.e., ensuring employee rights, complying with regulations, and adapting to cultural differences, while also managing risks. Only through responsible business practices can companies strike a balance between growth and cost, achieving true globalization.
______________
Chen Li is an Economic Research Fellow at ANBOUND, an independent think tank.
