Cultural conflict, a slow reaction to changes in local markets, and a shortage of capital top the list of challenges that Chinese firms face abroad, according to a survey of 150 firms conducted by the World Bank Group.

China's growing outbound investment is the subject of widespread attention, but Chinese companies wanting to invest abroad face issues rooted in policies adopted by domestic and overseas authorities.

Other daunting business challenges involve strategy, financing, brand development, information management and human resources, the group said.

The group conducted a survey last summer of firms with investments in 76 countries, which found most investments are concentrated in Asia, but companies are increasingly investing in western Europe, North America and Africa.

China's overseas investment is driven by the same factors spurring foreign direct investment by companies in other countries, the survey found.

The survey showed market and resource exploration, and the acquisition of strategic assets, such as access to technology, brand names and distribution channels, are the key drivers, with their respective importance varying over time.

Most Chinese firms are new to overseas direct investment, the survey found.

Like companies from the United States in the 1950s, Japan in the 1970s and South Korea in the 1980s, Chinese firms are on a learning curve, expressing a need for consulting support in most aspects of business.

With the exception of quality-to-price ratio and quality of products and services, all other comparative advantages claimed by Chinese companies in the domestic market seem to erode on the international market.

Chinese firms enjoy Chinese government support, particularly when investing in Africa and the Democratic People's Republic of Korea, but face daunting administrative procedures in China to get their overseas foreign direct investment projects approved and to access foreign exchange.

Chinese firms have yet to make use of widely available mechanisms to hedge business and political risks.

The survey group selected companies from the cities of Dalian, Beijing, Shanghai, Hangzhou, Ningbo, Shenzhen, Xi'an and Chengdu. The results were published on Tuesday at a meeting on China's outward foreign direct investment jointly organized by the group and the Investment Promotion Agency of the Ministry of Commerce.

Source: Xinhua