New Pathway for Chinese Companies Venturing Overseas: Emerging Opportunities for China-Latin America Cooperation Initiated by APEC Peru 2024

As the year draws to a close, Latin America is becoming increasingly vibrant.

In November, the 31st APEC Economic Leaders’ Meeting (AELM) commenced in Peru, bringing together heads of state, officials, and business representatives from 21 economies across the Asia-Pacific region to the capital, Lima. From the AELM to the subsequent G20 Summit in Brazil, a series of significant multilateral events have been held in Latin American countries, capturing global attention.

Against this backdrop, Caixin Global and Lenovo Group jointly hosted the APEC-Caixin Roundtable in Lima, centered around the theme “China-LatAm: Unlocking New Sources of Growth for a Shared Prosperity”. Chinese and Peruvian experts, scholars, and entrepreneurs were invited to engage in comprehensive dialogue and discussions.

As one of the world’s largest economic regions, Latin America ranks as the second-largest destination for Chinese overseas investment. The economic and trade ties between China and Latin America are highly complementary. Over the past 20 years, the total goods trade volume has increased by 35 times, significantly outpacing (4-fold) the growth in trade between this region and the rest of the world. China has been the second-largest trading partner of Latin America for ten consecutive years. In 2023, the total trade volume between China and Latin America reached a historic high of USD 489.047 billion. From January to July 2024, the total value of China’s exports to Latin America was USD 156.558 billion, marking an 11.7% increase year-on-year.

This robust relationship has not only invigorated economic growth within Latin American countries but also offered Chinese enterprises a vast platform to explore internationally. In today’s ever-changing global landscape, the growing demand in Latin America continues to offer Chinese enterprises new market spaces. With the successful conclusion of the AELM, the trend of Chinese enterprises expanding into Latin America is expected to continue, bringing about new development opportunities.

New opportunities for Chinese companies going global

Over the past two decades, Chinese companies have become increasingly active in investing in Latin America. In recent years, the total amount of capital influx from Chinese enterprises into Latin American countries has nearly constituted 10% of the region’s total foreign investment intake.

Regarding the countries where Chinese enterprises have invested, their investments in Latin America have predominantly focused on South American countries such as Brazil, Argentina, Chile, and Peru. From the investment structure perspective, these investments primarily target in mining, agriculture, oil, and infrastructure sectors like railways, highways, and electricity. China’s investment in Brazil accounts for about half of its total investments in the Latin American region that encompass a wide range of industrial sectors. Countries like Venezuela, Chile, and Peru, with their abundant oil, gas, and mineral resources, have also become key destinations attracting Chinese investment in Latin America.

Data indicates that by September 2023, China had undertaken over 200 infrastructure projects in Latin America and the Caribbean (LAC). These projects span areas such as transportation infrastructure, public buildings, airports, ports, and power equipment. As of the end of 2022, China’s foreign direct investment (FDI) stock in the LAC region had reached USD 596.2 billion, representing an almost sevenfold increase from the end of 2013.

In addition to the significant presence of Chinese enterprises in key sectors such as mineral resources and transportation infrastructure, the consumer electronics sector is also a major focus for Chinese companies entering Latin America. Several Chinese mobile phone manufacturers, including Lenovo, Xiaomi, Transsion, and Honor, have successively targeted this vast market with a population of 650 million. According to the latest data from Canalys, after years of development, four out of the top five mobile phone market shares in Latin America in the third quarter of 2024 are held by Chinese brands. Among these, Motorola, acquired by Lenovo, ranked second.

Currently, the scope of industrial investments by Chinese companies in Latin America is expanding to green energy, digital technology, and cross-border e-commerce, positioning Latin America as a key partner in the Belt and Road cooperation.

Especially in Brazil, Chinese Internet companies have deeply integrated into various segments of Brazil’s Internet ecosystem: Chinese e-commerce platforms like SHEIN, AliExpress, and Shopee, or those with “Chinese DNA”, have become key players in Brazil’s e-commerce space; leading Chinese logistics firms such as Cainiao, J&T Express, and iMile have made significant strides in Brazil; TikTok and Kwai (overseas version of Kuaishou) have also emerged as major short video platforms in Brazil; Didichuxing has risen to become the second largest mobility service provider in the Brazilian market.

The year 2024 signifies the 10th anniversary of the proposal of building a China-LAC community with a shared future. Following the successful conclusion of the AELM, economic and trade relations between China and Latin America are expected to grow even closer based on existing foundations. In such an environment, friendly diplomatic ties and favorable conditions for foreign investment will undoubtedly create new opportunities for more Chinese companies to sail to the Latin American region.

Development Strategies in the Latin American market

Although Chinese companies are on the verge of a new era of venturing into Latin America, navigating this untapped market remains a challenging endeavor. Experience from the past indicates that Chinese companies have frequently faced obstacles in the Latin American market, particularly in the electronics sector: stringent protectionist policies, intricate tax regimes, and the high costs of logistics and production are major barriers.

Taking Brazil as an example, the high tariffs and complicated tax structures make market entry challenging. The economic crisis and currency devaluation in 2015 severely affected market demand, leading many Chinese companies to substantially reduce or withdraw their presence in the Brazilian market. Moreover, with up to 58 different taxes and high logistics costs, doing business in Brazil becomes even more difficult.

Under these circumstances, Chinese companies venturing into Latin America need to learn essential skills to address challenges related to the complex tax system, high tax rates, localized operations, elevated logistics expenses, and cultural differences.

Lenovo Group, as a pioneer among Chinese companies entering the Latin American market, has achieved significant success in the personal computer and mobile phone sectors after overcoming various challenges. It has consistently delivered impressive performance in Brazil over the years: Regarding the personal computer sector, Lenovo Group’s market share in Brazil surged from 3.56% in 2012 to 20.44% in 2022, realizing a sixfold increase within a decade, and is currently ranked second. In the mobile phone sector, since Lenovo Group’s acquisition of Motorola in 2014, Motorola has maintained the second position in Brazil’s mobile phone market share for nine consecutive years.

Additionally, Lenovo Group has committed to expanding its infrastructure and solutions business, bringing mature and reliable Chinese business intelligent solutions to the Latin American market. This has effectively supported countries like Brazil and Mexico in fostering the growth of small and medium-sized enterprises and advancing the reindustrialization process. By 2023, Lenovo Group had successfully ranked among the top two in Brazil in terms of market share in the server and entry-level storage business.

Looking back, Lenovo Group’s success in expanding into the Latin American market showcases its practical methodology honed over 20 years of international ventures, centered on “three main pillars” and “two fundamental cornerstones”. These three main pillars are a global supply chain, a global R&D system, and a global marketing system, which together form Lenovo’s unique operational model of “leveraging global resources for local delivery”.

On the one hand, Lenovo Group fully harnesses superior global resources—such as capital, talent, R&D, supply, and manufacturing—for streamlined allocation. Concurrently, it develops marketing, delivery, and service operations tailored to local markets to effectively bridge the “last mile” of localization for customers. This helps achieve higher customer satisfaction, enhanced compliance, and better utilization of regional policies, and meanwhile contributes to a more secure and resilient supply chain.

Public data reveals that Lenovo Group, as a global technology manufacturing enterprise, currently operates over 30 manufacturing bases and 80 logistics distribution centers worldwide. It engages in business across more than 180 markets with over 2,000 core suppliers, boasting a highly sophisticated global supply chain network.

Behind the support of the “three main pillars” lie digitalization and ESG as the two fundamental cornerstones, which help Lenovo Group to maintain steady progress in a complex and ever-changing international environment. In detail, Lenovo Group’s fully digital cornerstone permeates its entire value chain of “research-production-supply-marketing-service”: this not only underpins Lenovo’s global system to achieve scale, efficiency, and synergy but also facilitates its transition from a hardware to a solutions and services provider. Moreover, the ESG corporate social value forms the soft power of Lenovo Group, allowing it to garner more respect in an intricate and evolving environment.

In the Latin American market, Lenovo has implemented a strategic approach designed to penetrate different markets effectively. In Brazil, Lenovo Group has introduced mid-to-high-end products that cater to the demands of the Brazilian market through a “self-owned factory + ODM” hybrid manufacturing model. Simultaneously, by establishing a “technological innovation” brand image and leveraging the first mover advantage in the 5G market, Lenovo’s personal computer and mobile phone businesses have secured the second largest market share in Brazil and consistently maintained robust growth.

In Argentina, Lenovo Group has proactively adjusted its strategic framework in response to local policies, proposing a “vertical integration” manufacturing model. Collaborating with OEM partners, they have set up dedicated facilities to achieve localized production of Motorola mobile phones. The efforts to bolster Argentina’s “strongest computing power” and the support on local scientific research have made Lenovo Group’s personal computer business rank first in Argentina for five consecutive years, with a market share of 16.14%. The mobile phone segment increased its share from 12% in 2017 to 37% in 2021, successfully reaching the number one spot in the market.

In Mexico, Lenovo Group has strategically positioned itself to navigate external tariff fluctuations by establishing its own factory in Monterrey for the production of desktop computers and servers. By the second quarter of 2022, Motorola captured a 28% market share in Mexico, surpassing Samsung, Apple, and other manufacturers to become the market leader.

Lenovo Group’s proven success in expanding into Latin America offers invaluable insights for Chinese enterprises venturing into the region amidst new opportunities: Confronted with the intricate challenges of the Latin American market, Lenovo Group shares specific strategies based on its own experience, which aids Chinese companies to expand local business and improve their competitiveness.

Leading the new trend of value going global

When considering the expansion of Chinese enterprises in Latin America as a marathon, ESG plays a crucial role in determining whether they can “establish a solid foothold” and “thrive” in the region after going international. This mandates that Chinese enterprises, in the new era, must transcend the simple exportation of products and brands, focusing instead on constructing local supply chains while also fulfilling their social responsibilities.

In reality, embracing the principles of ESG (Environmental, Social, and Governance) has evolved into a significant new trend for Chinese enterprises expanding into the Latin American market. By engaging in proactive ESG practices, companies can enhance both their brand image and value locally, while also unlocking greater developmental opportunities. Taking Lenovo Group as a case in point, its ESG initiatives in Latin America are a clear illustration of this trend:

In Brazil, Lenovo Group has been actively pursuing green technologies and introduced biodegradable bamboo fiber packaging, which has significantly cut down on packaging costs and carbon emissions, as well as transportation expenses. Furthermore, Lenovo utilizes warm water cooling technology to improve energy efficiency in machine cooling, achieving over 40% cost savings compared to traditional air-cooled systems, thus aiding Brazilian data centers in reducing carbon emissions. These green technology initiatives not only contribute to energy saving and carbon reduction but also enhance production efficiency and cost control capabilities.

Lenovo Group has also leveraged artificial intelligence technology to implement a sign language-to-text project in Brazil, aiding 2.3 million deaf and hard-of-hearing individuals in communication, thus significantly ameliorating their well-being. The project demonstrates Lenovo’s capacity for innovation in the global market and reflects its strong sense of social responsibility.

Furthermore, Lenovo Group has initiated the “Human-centered Technology” project on Robinson Crusoe Island in Chile, which aims to connect this remote island community to the global economy through technological means, thereby creating more new opportunities for the locals. Meanwhile, Lenovo provides community residents with new knowledge and skills that aid in natural resource management and infrastructure improvement, empowering them to leverage local environmental resources for sustainable long-term development. This project not only bridges the digital divide but also elevates the overall welfare of the region. Notably, Lenovo also employs technology to assist local conservation organizations in making real-time decisions, thereby more effectively safeguarding rare species and ecosystems from highly destructive invasive predators.

It should be emphasized that Lenovo Group’s experience and achievements are not merely an add-on following their success in the Latin American market. Quite the opposite, in the current complex international landscape, embracing comprehensive ESG principles and fulfilling corporate social responsibility and sustainable development objectives have long served as fundamental pillars for modern Chinese enterprises to venture abroad. These efforts have become crucial in unlocking additional market opportunities in Latin America and achieving recognition from local communities.

Looking ahead, with the continuous deepening of economic and trade cooperation between China and Latin America, Chinese enterprises will encounter new opportunities and challenges in their endeavors to expand in this region. By drawing on the successful experience of Lenovo Group in the Latin American region, Chinese enterprises are expected to better adapt to the diverse market environment. As new opportunities arise in China-Latin America cooperation, they aim not only to “go out” by successfully expanding overseas but also to “go up” by elevating their reach and influence.