Made "with" China? — Shi Zhan on RMB Appreciation and Building a "Shadow China" Abroad

"Once you have earned all the world’s money, you cannot keep doing so for long. If everyone else has no money left to earn, they will no longer be able to keep buying your goods..."

One phrase has stuck with me since my recent trip to Beijing: “Made with China.” I heard it in conversation with a scholar who serves as one of China’s chief narrative architects—a master of “telling China’s story well.”

He was responding to my questions about the sustainability of China’s trade surplus with Europe. His argument in a nutshell: Beijing recognises there’s a problem, but it will be resolved by the transition from a “Made in China” world to a “Made with China” paradigm that promises jobs and local value creation for host economies.

I was left with the impression of an important new line being worked into shape.

The case for a new wave of Chinese overseas investment is gaining ground in both discourse and policy. Last month saw the publication of a new State Council regulation granting Beijing wide-ranging powers to punish foreign entities deemed to harm Chinese investors and our new June digest section, “Going Out”, engaged with this trend.

The article by Shi Zhan, a professor at Shanghai International Studies University, was among the pieces featured in our digest and is translated in full below. It is one of the most readable examples of this emerging genre, offering a coherent argument that Chinese companies expanding overseas both need to undergo and are already undergoing a “coming of age”.

Shi writes in the spirit of the prominent economist Yao Yang, whose speeches helped popularise the idea of “Building China Abroad”. Like Yao, he holds up Japan as a model—but uses its experience as a springboard for an argument that renminbi appreciation would both reduce China’s trade surplus and accelerate overseas investment.

His wider argument—including his suggestion that renminbi appreciation could attract foreign buyers of Chinese government bonds, giving Beijing additional fiscal resources with which to cushion the resulting employment pressures—is striking. But what makes the piece especially relevant to European policymakers is the tension between the emerging “Made with China” narrative and Shi’s frank admission that only the “front end” of Chinese manufacturing will move abroad.

The piece goes well beyond a call for companies to invest overseas—it sets out a wider architecture for China’s next phase of globalisation. Read alongside the new outbound-investment regulation, it offers a tantalising glimpse of one possible route by which Beijing might seek to mitigate trade tensions and recast China’s place in the world: from the “factory of the world” to the hub of a geographically dispersed, but still China-centred, production system.

— Jacob Mardell

Key Points

1. Chinese companies’ large-scale overseas expansion is no longer optional. Trade-war pressure is forcing the front end abroad, while China’s enormous trade surplus makes renminbi appreciation—and therefore faster overseas expansion—increasingly likely.

2. This is a spillover of Chinese manufacturing, not its wholesale relocation. Final-assembly operations can move overseas to avoid tariffs, while China’s dense supply-chain “middle platform” is far harder to reproduce elsewhere.

3. Chinese overseas factories will continue purchasing intermediate goods from China, extending Chinese industrial standards and enlarging the reach of the domestic supply-chain network.

4. Renminbi appreciation is the fundamental means of reducing China’s unsustainable trade surplus and improving its diplomatic environment; because China’s asset-price correction has already occurred, it would not recreate Japan’s bubble-driven crisis.

5. A stronger renminbi would accelerate overseas investment, lowering the cost of acquiring assets abroad, encouraging further front-end expansion and potentially creating a “shadow China” overseas.

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6. Chinese factories abroad would still buy from domestic suppliers and, amid appreciation expectations, would have an incentive to settle those transactions in renminbi, helping to create a renminbi currency zone.

7. Overseas demand for renminbi assets could support government bond issuance to replenish social-security funds, cushion employment pressures and restore domestic purchasing power, helping China become a producer–consumer economy.

8. SMEs are highly exposed when expanding abroad alone and need integrated support in manufacturing, supply chains, logistics, finance, local regulation and workforce management, with larger companies taking the lead.

9. Japan’s large general trading companies offer a model, while the Chinese manufacturer Midea represents a starting point, but China still lacks a broader ecosystem combining corporate platforms with trade finance, project finance and collective capacity to shape rules.

10. The decisive coming-of-age transition is from accepting or evading rules to participating in their formation—the complaint letter submitted by the China Chamber of Commerce in Indonesia may symbolise the beginning of this transition.

Name: Shi Zhan (施展)
Year of birth: 1977 (Age: 49)
Position: Professor, Institute for the Global History of Civilisations, Shanghai International Studies University
Previously: Director, World Politics Centre, China Foreign Affairs University
Research focus: History of Western political thought; history of Western civilisation; political sociology; philosophy of history; international political economy; globalisation and the international expansion of Chinese manufacturing
Education: Bachelor of Engineering in Management Engineering, School of Management, Beihang University (1999); MA in History, Graduate School of the Chinese Academy of Social Sciences (2004); PhD in History, Peking University (2008)
Experience Abroad: Visiting scholar, Paris 1 Panthéon-Sorbonne (2006–2007)

CHINESE COMPANIES GOING GLOBAL NEED TO COME OF AGE
Shi Zhan (施展)
Published by Shi Zhan’s World on 11 June 2026
Lightly edited machine translation
(Illustration by ChatGPT)

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I. Chinese Companies Going Global Need to Come of Age

In recent years, you have probably heard a common refrain: for Chinese companies, “not going overseas means waiting to die, while going overseas means courting death”. So how exactly are they supposed to survive?

In my view, Chinese companies’ overseas expansion is an inevitable trend, but they must also undergo a coming-of-age rite. Two recent developments have given me a glimpse of what that rite might look like.

In mid-May 2026, I visited Midea Group’s air-conditioner factory in Thailand for field research. It is currently the largest air-conditioner production base in Southeast Asia and is highly automated. What excited me even more, however, were the five large Chinese characters at the entrance: “Going-Global Partner” [出海合伙人]. What did they mean? Midea had taken the pitfalls it had encountered during its years of overseas expansion, the experience it had accumulated and the solutions it had successfully put into practice, and brought them together on a platform open to other companies.

The day before I left for Thailand, a news report caught my attention. The China Chamber of Commerce in Indonesia had submitted a five-page letter of complaint to President Prabowo, stating bluntly that Chinese companies in Indonesia faced “excessively stringent regulatory standards, overzealous enforcement and even corruption and extortion by the responsible authorities”.

The two developments may appear entirely unrelated, but they point to two key questions concerning distinct dimensions of the same broader trend. Midea’s overseas platform addresses one question: once Chinese companies go abroad, how can they obtain systematic support from a platform? The complaint letter from the China Chamber of Commerce in Indonesia addresses another: once Chinese companies have grown to scale, how can they participate in shaping the rules of their host countries? One provides “hard support”; the other, “soft safeguards”. Only with both can Chinese companies expanding overseas begin to come of age.

To understand why these two developments matter, we must first return to a more fundamental question: why do Chinese companies have no choice but to expand overseas?

II. Spillover: Going Global amid the Trade War

It has now been eight years since the trade war began. During that period, China’s exports to the United States have indeed continued to decline, while its total exports have continued to rise. The usual explanation is that Southeast Asia, the Middle East, Latin America and other regions have absorbed these additional exports. Yet these markets simply do not have purchasing power on that scale. The real purchasing power remains in the United States: Chinese companies are merely taking a detour through these regions to continue reaching the US market.

[Note: Chinese customs data do not show a continuous decline: exports to the United States rose from US$478 billion in 2018 to US$525 billion in 2024, before falling to US$420 billion in 2025. The broader divergence the author highlights is nevertheless real. His description of third-country trade as a “detour” also risks understating the genuine offshore production and local value added involved, rather than mere transshipment.]

When the trade war first began, Chinese companies were indeed caught off guard and placed firmly on the defensive. But the business community quickly began trying to save itself, making a determined push overseas. Over the next eight years, it established a global footprint, giving Chinese companies an increasing range of ways to respond to the trade war.

The question is whether this process of seeking salvation through overseas expansion will hollow out the foundations of Chinese manufacturing. The answer is no. To understand why, we must examine an important change brought about by China’s economic rise.

As the twenty-first century began, China’s economy entered a period of explosive growth. This gave rise to a vast supply-chain network along the country’s south-eastern coast, profoundly changing how manufacturing was organised.

Consider a simplified example. In the past, producing a complex product might have required 100 processes, 70 of which were carried out within a single factory across 70 separate workshops. Today, those 70 workshops may have become 70 independent factories, transforming what was once internal co-operation into co-operation between firms. The original 100 factories may thus have fragmented into 7,000, supplying one another and dynamically reconfiguring their supplier relationships. Each factory is highly specialised, ensuring efficiency at every stage of production. At the level of the network as a whole, continual reconfiguration also ensures flexibility.

This shift in organisational form can be understood by analogy with internet architecture. The internet has a back end [后台], a middle platform [中台] and a front end [前台]. The back end consists of vast quantities of raw data, the middle platform integrates a range of technical capabilities and the front end is the interface through which users interact with the system. Provided the middle platform is sufficiently powerful, the front end can remain lean, drawing on whatever capabilities it needs from the middle platform.

Manufacturing works in much the same way. The back end consists of infrastructure networks and pools of skilled workers and engineers. The middle platform is the supply-chain network capable of producing all kinds of intermediate goods with high efficiency and flexibility. The front end consists of final-assembly plants that deliver finished products to customers. Provided the middle platform is sufficiently powerful, the front end can remain lean and do no more than assemble the final product.

Today, China has the world’s strongest back end, while its middle platform is also the largest and most efficient anywhere in the world. No other country can replace it. During the trade war, the middle platform produces business-to-business goods that are sold to the front end. Because they do not directly face tariff pressure from consumer countries—primarily Western countries—there is little incentive for the middle platform to move overseas. The front end, by contrast, produces business-to-consumer goods for sale in those countries. It therefore has an incentive to move overseas to circumvent tariffs.

Consequently, with the exception of a few industries with short and simple production processes, almost everything that has moved overseas from China during the trade war has belonged to the front end. The middle platform is far more difficult to relocate.

Will the middle platform move overseas in the foreseeable future? The answer remains: “very difficult”. The middle platform is, in fact, an enormous and complex manufacturing ecosystem that has evolved organically over several decades. No country could absorb China’s entire middle-platform network at [anything like] its current scale; other countries can take on only fragments. But fragmentation means losing economies of scale, reducing efficiency and raising costs.

More importantly, if the middle platform genuinely relocated overseas, China would face large-scale unemployment and bankruptcies, causing the prices of factors such as land, labour and capital to fall sharply. In the recipient countries, meanwhile, factor prices would soar, rapidly reversing their cost advantage and curbing the incentive for further relocation. During field research in Vietnam at the end of 2024, I learned that, even after only a small portion of the front end had moved there, rents in industrial parks around Hanoi and Ho Chi Minh City were already approaching, or even exceeding, those in Shanghai and Shenzhen.

My judgement, then, is that the front end will move overseas on a large scale, while the middle platform will find it difficult to do so. And if only the front end moves, this is not really a “relocation” at all, but rather a “spillover” of China’s manufacturing network.

Some may object that moving too much of the front end overseas must still harm China’s economy. In fact, the opposite is true.

Although the front end has moved overseas, it must still procure intermediate goods from the domestic middle platform. The overseas expansion of the front end is therefore also a process through which Chinese industrial standards are exported. As those standards spread overseas, the reach of the middle platform actually grows. China’s position as the world’s manufacturing centre rests not only on production capacity, but also on standards. The more of the front end that moves overseas, the more Chinese industrial standards are exported and the more firmly the middle platform’s position as a hub of global supply chains is secured. Rather than keeping both the front end and the middle platform confined within China, it is better to allow the front end to move overseas on a larger scale and carry Chinese industrial standards out into the world.

III. Renminbi Appreciation: The Financial Logic Accelerating Overseas Expansion

The preceding discussion concerned the production and trade logic driving Chinese companies overseas. But there is also a financial logic pushing them in the same direction, and its force may be even greater.

Consider one fact. In 2024, China’s trade surplus approached US$1 trillion. In 2025, it reached US$1.2 trillion, giving it an overwhelming lead over the second-ranked country. Never in human history has any country recorded a surplus on this scale.

Once you have earned all the world’s money, you cannot keep doing so for long. If everyone else has no money left to earn, they will no longer be able to keep buying your goods, and eventually you will stop earning money too. The more immediate danger is that, before other countries collapse, they may decide that economic measures are no longer sufficient to constrain you and resort to other means instead. Your diplomatic environment will then deteriorate. The worsening of China’s diplomatic environment in recent years is directly related to this. A trade surplus on such an enormous scale is unsustainable.

How can this imbalance be resolved? Would imposing tariffs on China, as the United States has done, work? The continued rise in China’s exports has already provided the answer: no.

What if the United States imposed tariffs across the board on all countries? That would not work either. It would effectively be equivalent to imposing no tariffs on China, while merely making everything the United States buys more expensive. The trade imbalance could be substantially reduced only if other countries joined the United States in imposing tariffs on China. But every country has its own interests and calculations, making concerted action impossible.

Follow the question to its logical conclusion and it becomes clear that there is only one measure equivalent to every country imposing broad tariffs on China: appreciation of the renminbi. I therefore expect China–US trade negotiations to arrive at this issue sooner or later.

The prospect of renminbi appreciation may bring to mind the 1985 Plaza Accord. Many people online claim that the accord forced the yen to appreciate, thereby causing Japan’s “lost three decades”, and that it was all part of a grand American conspiracy. But the historical reality is far more complicated.

In fact, Japan’s prime minister at the time, Yasuhiro Nakasone, actively wanted the yen to appreciate. On the one hand, he recognised that Japan’s excessively large trade surplus was unsustainable because it would seriously worsen the country’s diplomatic position. On the other hand, he believed that, as the world’s second-largest economy, Japan needed to assume corresponding international responsibilities. It should therefore actively promote yen appreciation, using the pressure created by a strong yen to force domestic reform and open the Japanese market, thereby turning Japan into another engine of global growth. Britain, France and Germany also participated in the US–Japan negotiations, and the combined efforts of the parties culminated in the Plaza Accord.

After the yen appreciated, Japanese goods became more expensive internationally, suppressing exports. Much of the trade imbalance was reduced, easing pressure on Japan’s diplomatic position. The other side of appreciation was that the yen’s purchasing power overseas increased. Following the Plaza Accord, Japan invested abroad on a massive scale, its companies expanded overseas and the country accumulated an enormous stock of foreign assets. Today, Japan’s net foreign assets are comparable in scale to its domestic GDP, forming what has been called a “shadow Japan” [影子日本].

Once this point had been reached, whether the yen appreciated or depreciated mattered much less to Japan. Appreciation raised the value of its domestic assets, while depreciation raised the value of its overseas assets, allowing the two sides of its overall asset position to offset one another. This also gave Japan far greater room for manoeuvre in responding to ageing and other challenges.

Japan did, of course, experience a prolonged downturn after the Plaza Accord. But the blame lies not with the yen’s appreciation, but with policy errors by the Bank of Japan.

After the Plaza Accord was signed, Japanese exports suffered and the domestic economy came under considerable short-term pressure. To stimulate the economy, the Bank of Japan cut interest rates to extremely low levels, fuelling an enormous asset bubble. By the late 1980s, the value of land in Tokyo alone was said to be almost enough to buy half of the United States. Such elevated asset prices posed an enormous risk to the Japanese economy. The central bank therefore raised interest rates at the end of 1989, deliberately bursting the bubble. Individuals and companies that had borrowed heavily during the low-interest period were suddenly plunged into debt distress. Their priority became finding ways to repay their debts, and they no longer dared to consume or invest. This produced a “balance-sheet recession”.

[Note: The Bank of Japan first raised its official discount rate in May 1989, followed by further increases in October and December 1989 and in 1990. The Bank presented the move as a preventive response to inflation, rather than an explicit move to burst the bubble.]

The crucial difference between China today and Japan at that time lies in the sequence of events. In Japan, the yen appreciated first, after which the central bank deliberately lowered interest rates, inflated a bubble and then burst it, causing a recession. In China, by contrast, asset prices have already undergone a deep correction before any appreciation of the renminbi. There is no bubble on the scale of Japan’s at the time. This is not to say that renminbi appreciation would carry no risks, but they would not be the same kind of risks that Japan faced.

What would happen if the renminbi appreciated?

First, exports would be suppressed and the large trade surplus reduced, but China’s diplomatic environment would improve as a result.

Second, appreciation would lower the cost of investing overseas, encouraging Chinese companies to expand abroad on a still larger scale and causing more of the front end to spill overseas.

Third, the front end’s large-scale overseas expansion would still depend on the domestic middle platform, from which it would need to purchase components. But in what currency would it pay? Given the prospect of continued renminbi appreciation, overseas front-end operations would be more inclined to settle transactions in renminbi to avoid exchange-rate risk. This means that the front end’s large-scale overseas expansion could give rise to a renminbi currency zone [人民币货币圈] across a manufacturing network extending beyond China.

As the renminbi’s influence expands and imported goods become cheaper, China could also evolve from a producer economy into a major consumer economy. Given large-scale overseas expansion and the accumulation of foreign assets, it may, over time, also develop an overseas “shadow China” [影子中国].

But one unavoidable problem remains. Renminbi appreciation would inevitably create employment pressure at home. Appreciation would not happen all at once, but unfold over several years. Even so, the pressure would be very real. How could it be alleviated?

The answer is social security. Yet China’s social-security system is already under considerable strain. How could it absorb an even greater burden?

This raises an intriguing possibility. If the renminbi were on a clear upward trajectory, renminbi-denominated assets would become particularly attractive overseas. China could then issue renminbi-denominated government bonds and attract large-scale purchases from overseas holders of the currency, using the funds raised to bolster its social-security funds. The United States already draws resources from the rest of the world to solve its domestic problems. China could gain the opportunity to do the same.

In other words, renminbi appreciation would not simply mean “exports suffering”, but would set off a chain reaction: appreciation → larger-scale overseas expansion of the front end → a renminbi currency zone → the issuance of renminbi-denominated government bonds to bolster social security → a recovery in domestic purchasing power → an upgrade from a producer economy to a producer–consumer economy. The costs incurred at each stage would be offset by the gains from the next. The process would not, of course, be so straightforward in reality. In particular, the renminbi is not yet freely convertible on the capital account, meaning that extensive reforms would still be required. Nevertheless, an important window of opportunity has opened.

At this point, the production–trade logic and the financial logic converge. Pressure from the trade war drives the spillover of the front end, while renminbi appreciation accelerates its overseas expansion. With these two forces combined, the question is not whether Chinese companies will expand overseas on a large scale, but how quickly and on what scale.

IV. Platforms: Who Will Pave the Way Overseas?

But this raises another problem. Overseas expansion may be inevitable, yet the pitfalls Chinese companies have encountered abroad would already fill several books. They face a range of problems that are difficult to imagine from within China. What do local laws and regulations require? How do trade unions operate? How should supply chains be built? How does customs clearance work? Companies venturing abroad without understanding any of this are bound to run into difficulties—and a serious enough misstep can drag them under.

Small and medium-sized enterprises are particularly vulnerable. They lack the resources of large companies and have little room for trial and error. Venturing overseas on their own leaves them completely exposed. Is there a way to ensure that SMEs are not so isolated and unsupported when they expand abroad?

Japan once again offers a historical example worth examining.

When Japanese companies expanded into Southeast Asia on a large scale during the 1970s and 1980s, Japan’s sōgō shōsha—its general trading companies—underpinned their expansion.

The role of the sōgō shōsha extends far beyond that of a trading intermediary. At their core, they are “industrial organisers”. The five major general trading companies, including Mitsubishi Corporation, Mitsui & Co. and Itochu, established comprehensive global networks spanning trade, finance, logistics and government–business co-ordination. Japanese SMEs seeking to expand overseas did not need to blaze a trail from scratch. The trading companies had already paved the way; all they had to do was follow.

More specifically, the trading companies perform several key functions. First, they provide trade and distribution channels, building vast global sales networks and even acquiring retail outlets to gain direct insight into consumer demand. Itochu’s US$5.4 billion acquisition of full ownership of Japan’s FamilyMart in 2020 is one example. Second, they provide financial support, offering trade and project finance to SMEs and lowering the financial barriers to overseas expansion. Third, they co-ordinate relations between government and business. Japan has constructed a comprehensive commercial system in which large and small trading companies, chambers of commerce and even diplomatic resources all form part of its overall operational capacity. Through chambers of commerce, SMEs can invite ambassadors and counsellors stationed locally to appear publicly in support of their businesses. Diplomatic power and commercial activity are closely intertwined.

In his book The Great Overseas Expansion [大出海], Lin Xueping offers an analogy: companies operating abroad are the ground forces, but they also require supporting fire from the sea and air. Large and small trading companies, information-service providers, chambers of commerce and even diplomatic resources all form part of this overall operational capacity. When companies expand their presence overseas, they are in fact engaged in a systemic battle between multinational corporations from different countries. An integrated land, sea and air support system for commerce must therefore be built as a whole.

Supported by this system, Japanese companies developed formidable competitive strength in Southeast Asia. The monopolistic position once held by Japanese-brand cars in the region, for example, has been described as a “supply-chain death grip” [供应链的死亡缠绕]: like a python constricting its prey, with every point of constriction precisely calculated.

Looking back at China, do we have comparable institutions capable of providing this kind of support?

This is why I was so excited when I saw the words “Going-Global Partner” at Midea’s factory in Thailand.

Midea began expanding overseas relatively early and has accumulated extensive experience over the years. It has now distilled and integrated that experience into a platform open to other companies: the Going-Global Partner Programme. Planning to expand overseas? The platform offers one-stop solutions for building factories, establishing supply chains, navigating customs procedures and training employees to work across cultures. Midea has broken down its experience of deploying 72 AI applications and 13 AI agents in production settings into 12 modular solutions that can be replicated rapidly. Its own factory in Thailand serves as the model.

At the same time, Midea has begun expanding into logistics. Since 2025, it has worked with logistics partners in Thailand to establish a “green and smart supply-chain delivery centre”, covering the entire chain from the supply of production materials to finished-goods storage, distribution and delivery. Together, they are building a three-tier warehousing network comprising “regional hubs, national delivery centres and forward warehouses”.

This means that Midea’s overall presence in Thailand extends far beyond the construction of several factories: it involves the deployment of an entire system. Zhang Xiaoyi, Vice-President of Midea Group, explained that the Going-Global Partner Programme aims to “turn every pitfall Midea has encountered into a ‘guide to avoiding pitfalls’ for companies expanding overseas, providing full-cycle, hands-on support and helping them establish operations on the ground, step by step”.

Compared with Japan’s general trading companies, Midea differs in one crucial respect. The trading companies began as traders and are therefore natural “intermediaries”; Midea began as a manufacturer and is a “practitioner evolving into an enabler” [实践者升级为赋能者]. This difference is precisely its advantage: Midea has itself been through the entire process, and its experience has been built up through first-hand operations rather than external observation.

Yet Midea’s enabling role currently remains concentrated in manufacturing, supply chains and digitalisation. Compared with the comprehensive ecosystem of the general trading companies, at least two components are still missing: a financial platform and the capacity for government–business co-ordination—which I prefer to call the capacity to shape rules. A financial platform is among the most urgent needs of companies expanding overseas. Without support from trade and project finance, the financial threshold for SMEs remains high. The capacity to shape rules is more complex: it cannot be built by any single company, but requires collective mechanisms.

These two shortcomings point directly to another test in Chinese companies’ coming of age overseas.

V. Rules: From Rule-Takers to Participants

This brings us back to the complaint letter submitted by the China Chamber of Commerce in Indonesia.

The letter to the president directly identified the multiple difficulties facing Chinese companies in Indonesia: steep increases in taxes and fees, restrictions on work visas, the suspension of several major projects and cuts of more than 70 per cent to quotas at some large mining sites. The chamber also stated that “enforcement standards in taxation, environmental protection, forestry and other areas are opaque, while enforcement agencies enjoy excessive discretion”. It added that “normal channels of appeal are obstructed, the departments involved pass responsibility between one another and delay responding, and some problems can be resolved only through third-party intermediaries that charge substantial fees”.

An Indonesian scholar commented: “China is usually cautious when commenting publicly, in order to preserve relations with partner countries. If it sends a warning letter like that, it means things have gone too far.” Several media outlets likewise described the move as “rare” and as “breaking an unspoken diplomatic understanding”. In the past, Chinese chambers of commerce had seldom presented their demands to the highest levels of a host government in such a public and formal manner.

In my view, the symbolic significance of this episode is more important than the letter’s specific contents.

How have Chinese companies traditionally responded to an unfavourable regulatory environment overseas? Broadly speaking, they have adopted one of two strategies: either accept the rules as given and suffer in silence, or look for loopholes whenever the rules work against them. These strategies may just about suffice while companies remain small. Once they grow larger, however, accepting the rules means continuing to lose out, while exploiting loopholes leaves them exposed to a reckoning at any time. Neither approach is sustainable.

The only sustainable approach is to participate in shaping the rules.

This does not mean confronting the rules of the host country. It means expressing companies’ interests through legitimate channels, engaging in the bargaining process and encouraging the rules to evolve in a more transparent and equitable direction—in other words, participating in the construction of more reasonable rules. The letter from the China Chamber of Commerce in Indonesia exemplifies this approach. The Indonesian government’s response also provided an initial indication that it could be effective. The Minister of Energy and Mineral Resources subsequently met representatives of several mining companies with Chinese investment and stated that the government had “agreed to temporarily suspend” increases in mining royalties and export taxes.

The efforts of the chamber in Indonesia are not merely an isolated case confined to one country. They represent the path that Chinese companies will inevitably have to follow once their overseas presence reaches a certain scale.

Midea’s overseas expansion platform and the efforts of the China Chamber of Commerce in Indonesia represent two sides of Chinese companies’ coming of age overseas. Midea addresses the need for “hard support”: the visible infrastructure of production, supply chains and logistics. The chamber in Indonesia addresses the need for “soft safeguards”: the less visible institutional environment of rules, systems and government–business relations.

Neither can be dispensed with. Without hard support, expanding overseas means going it alone, completely exposed. Without soft safeguards, even companies that achieve scale will remain on uncertain ground.

VI. Coming of Age Overseas

When the preceding strands are brought together, the overall picture of Chinese companies’ overseas expansion becomes clear. The underlying theme of that picture is a coming-of-age rite.

First, overseas expansion is an inevitable trend—a case of being forced to grow up. China’s enormous trade surplus triggered the trade war, which in turn forced the front end to spill overseas, while the middle platform will remain in China. Overseas expansion is not relocation, but reconfiguration. Like a young person leaving their hometown, it is not an act of betrayal, but a sign of growth.

Second, renminbi appreciation will accelerate this process, acting as a catalyst for maturation. An enormous trade surplus is unsustainable, and renminbi appreciation is the fundamental means of reducing it. Appreciation will drive the front end overseas on a still larger scale. As overseas front-end operations purchase intermediate goods from the domestic middle platform, they will tend to settle transactions in renminbi, potentially giving rise to a renminbi currency zone. China could then issue renminbi-denominated government bonds to bolster social security and cushion unemployment pressures at home. As these two lines of logic converge, the forces driving overseas expansion will multiply.

Third, overseas expansion requires support from enabling platforms—and companies must learn to band together. The dilemma that “not going overseas means waiting to die, while going overseas means courting death” can be broken only if large companies take the lead. Japan’s general trading companies showed that SMEs cease to be completely exposed overseas only when trade, finance, logistics and government–business co-ordination are integrated into a single system. Midea’s Going-Global Partner Programme is an important starting point: the pitfalls it has encountered provide the best guide to avoiding them. But the direction matters more than the individual example. Chinese companies need not one Midea, but a cohort of “Mideas”, along with the financial platforms and capacity to shape rules that these “Mideas” have yet to develop.

Fourth, once their overseas presence reaches a certain scale, companies must participate in shaping the rules. Accepting the rules is a matter of survival; participating in shaping them is a path to growth. The shift from exploiting loopholes to helping set the rules is the most important coming-of-age transition for Chinese companies overseas. The complaint letter from the China Chamber of Commerce in Indonesia is perhaps a symbolic event: Chinese companies are beginning to move from passive rule-takers to active participants in rule formation.

The large-scale overseas expansion of Chinese companies has only just begun. Going abroad is merely the first step; the real measure of capability is whether they can establish a durable footing. Doing so depends not on the courage to fight alone, but on an entire system—platforms paving the way, rules providing an escort, finance serving as a backstop and the renminbi opening the path.

That is why I was so excited when I saw the words “Going-Global Partner” at the entrance to Midea’s factory in Thailand. I was seeing not merely a single company expanding overseas, but what it looks like when the large-scale overseas expansion of Chinese manufacturing begins to come of age.

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