1) Approaching Projects as Projects

 

Overseas investments have additional demands that Chinese companies armed only with domestic experience have not had to deal with. Mining projects in China are often treated in isolation, with the primary goal being a fully functional mine rather than a mine that is suitably profitable. Success abroad, however, requires larger goals and successful integration into the global minerals market. Companies have to take on the responsibility – previously shouldered in part by Chinese government organizations in the domestic market – to conduct risk assessments and proactively detail when and how they will pay back their investments and make profits.

 

2) Using Chinese Standards For Profitability

 

The Chinese market has been capable of supporting mines with low-grade ores that would simply not be profitable elsewhere. While this is already changing as China’s economy develops, Chinese companies have in the past bought unprofitable mines by adhering to closely to Chinese development standards and ignoring local contexts. This is especially true in high-wage countries such as Australia.

 

3) Inefficient Company Organization

 

Chinese companies have a tendency to keep as much of their business in-house as possible. A mining company will serve as investor, operator, and contractor at the same time, even to the point where it becomes a distraction. Local companies and workers that could make a great contribution should be engaged with and trusted more proactively. The familiarity they have with the market could mean the difference between success and failure.

 

4) Poor Choice of Partners

 

Chinese companies that do engage with foreign companies – out of choice or necessity – will often make their choice based on comfort rather than quality. Mining companies have the ability to check their partners on local stock exchanges and through public authorities, and neglecting this in favor of a company led by e.g. diaspora Chinese can be a very poor decision.

 

5) Being Poor Neighbors

 

Chinese mining companies operating in China have well-established avenues – typically money – to deal with problematic local communities and the support of local officials. However, abroad, environmental or communal damage cannot necessarily be addressed in the same way; compensation may have to include job training, environmental protections, and other costs that may make the project unprofitable. Furthermore, political pressure might not always align with company interests either. Untenable mining projects, useless mining rights, and bad press can wreak major damage to a company’s viability.

 

While these mistakes are more culturally driven and harder to fix even in a stricter regulatory environment, many Chinese companies have shown themselves to be willing to adapt to the needs of local communities as they pursue their mining projects. Successfully investment cases abroad are increasingly characterized less by the wealth of minerals extracted, but by the efforts of the companies to work with local employees, engage with local communities, and take environmental protection seriously.

 

See Part 4 for Recommendations for Chinese Success Abroad