In today's complex and ever-changing global macro environment, investors are facing increasing challenges. "Cross-border growth" should not only be a strategy for companies seeking new opportunities but also a fundamental principle in global asset allocation.

During a presentation by Mr. Zhaoming Gu at ARK GROUP headquarters in May, Mr. Gu emphasized that "cross-border growth" must be a core concept in global asset allocation. This discussion revisited the real-world practices of companies expanding overseas and the critical decisions involved in international allocation. During an exchange following the presentation, professional investors and business leaders from various industries shared their experiences and insights on navigating the wave of globalization.

Below are the key highlights and notable quotes from this sharing session:

Artificial Intelligence

1.    "In the future, artificial intelligence could be a transformative technology for humanity. In this new era, can we get on board? Can we keep pace with global developments?"

2.    AI is one of the key technologies likely to profoundly change human society, representing the forefront of technological innovation and a focal point of global tech competition. It has the potential to become a new engine for economic growth, enhancing productivity and creating new business models with far-reaching impacts across various sectors, including healthcare, education, manufacturing, and services.

"China may face limitations in computing power, algorithms, and data, which present challenges for its development in the AI sector."

Internationally, competition and cooperation in AI coexist. Currently, exchanges between China and the U.S. on AI have weakened, and significant restrictions on data and content sharing may arise. Countries need to explore effective cooperate effectively on the international stage while promoting technological advancement.

3.    "The arrival of AI will have a disruptive effect on many industries and business models, including their profit structures."

The development of AI will create significant social and ethical issues, as well as changes in employment structures. Companies that were once dominant may face rapid decline. Therefore, stakeholders must explore solutions to the challenges associated with AI development. Additionally, policies and regulations related to AI need to be updated to address emerging technological challenges and ensure a balance between technological advancement and societal benefits.

Corporate Expansion

Corporate expansion has always been a key strategy for Chinese companies. In the context of global economic integration, selecting the right markets and regions, implementing effective management practices, leveraging core technologies and products, and capitalizing on strengths are essential considerations for any company expanding overseas.

Selecting the Right Market and Region

"When considering expansion, we need to analyze which regions align with our corporate background, such as Southeast Asia, Europe, North America, Africa, and the Middle East. We should assess factors like market stability, business environment, tax burdens, and potential local partners."

Southeast Asia is considered an ideal choice for Chinese companies due to its stability, rapid economic development, and friendly business environment. Additionally, some Southeast Asian countries share cultural and economic similarities with China, facilitating market entry and development. Establishing localized teams, understanding and adapting to local culture and market demands, and fostering strong relationships with local governments and businesses can effectively lower entry barriers and enhance market competitiveness.

"We chose Dubai because the largest tobacco company in the Middle East collaborates with us. They are the largest investors from China, and we maintain control through this collaboration. This consensus was achieved through sincere cooperation and mutual understanding."

In the Middle East, companies should seek reliable partners, collaborate with large local enterprises, and jointly invest in establishing production bases or service centers to leverage the region's capital and resources. This approach helps companies quickly enter the market and secure an advantageous position. Additionally, close cooperation with local governments and industry associations, utilizing policy support and market opportunities, is crucial for achieving long-term stability and growth.

Cross-Cultural Management and Localization Strategies in the Japanese Market

"Employees dispatched abroad must learn about local culture and customs to avoid actions that might offend locals."

When sending employees abroad, companies must ensure that they fully understand and respect local cultural norms to avoid conflicts. This requires employees to possess cross-cultural communication skills and demonstrate respect and tolerance for local cultures in their daily work and life. Additionally, locally hired employees should align with and integrate into the company’s cultural values to create a cohesive and goal-oriented team.

"We emphasize delegating decision-making to frontline teams who are most familiar with local market dynamics while headquarters provides support and resources."

In global operations, companies should empower frontline teams with decision-making authority, allowing those with the best understanding of local market dynamics to make business decisions. This management structure helps maintain consistent standards and operational processes globally while ensuring that decisions align with market needs, enhancing operational efficiency and responsiveness.

Core Technologies and Products

"The company's R&D investment now accounts for 25% of revenue, with last year's investment reaching RMB150 billion, leading to breakthroughs in multiple technology areas."

Companies should invest adequately in R&D to ensure technological advancements and product innovation, maintaining a competitive edge and mitigating intense market competition. High R&D investment enables continuous innovation, elevating technological standards, and ensuring a strong market position.

“Our R&D has achieved breakthroughs in both technology and patents. Currently, only our company and one other globally can offer compatible solutions.”

Utilizing core technologies and unique products can create a differentiated competitive advantage in target markets. This underscores how breakthroughs in technology and patents can help a company establish a unique competitive position globally, providing irreplaceable technologies and services, thereby significantly increasing customer loyalty and retention.

Leveraging Strengths

"Our management and production are outstanding in the industry, optimized through lean management and digital transformation."

Companies should leverage their strengths in management and production to enhance operational efficiency and product quality. Lean management and digital transformation can optimize production processes and supply chain management, improving efficiency and quality, reducing production costs, and increasing market competitiveness and customer satisfaction.

"Through an international branding strategy, we have increased our brand visibility and reputation in global markets."

Implementing an international branding strategy can enhance a company's global brand influence. This strategy helps attract global customers and partners by leveraging brand strengths. Tailoring marketing strategies to different market characteristics allows the company to precisely target customer segments, boosting market share and brand loyalty. This approach helps establish a strong global brand image and supports long-term stable development.

"Through our global fund management center, we have optimized fund allocation and risk control."

Establishing a global fund management center can optimize fund allocation and risk control, utilizing diversified financing channels to meet global needs. This approach helps reduce financial risks and improve fund efficiency. Strategic partnerships and acquisitions enable rapid market entry and business expansion, driving global growth and sustainability. These measures help companies gain a competitive edge in international markets and achieve long-term strategic goals.

Addressing the Phenomenon of Cash on Hand Exceeding Market Value

"Although our company's market value is low, our cash reserves are substantial. To make a joke, our cash now exceeds our market value."

In the current economic environment, many companies face the unique situation of having a market value lower than their cash reserves. Despite low market valuations, these companies have substantial cash reserves. To address this, companies should implement strategies such as establishing global fund management centers for effective fund allocation and risk management. Utilizing modern technology and treasury management systems can automate fund management and risk control.Additionally, companies should emphasize the deep relationships they have with banks to obtain better services and conditions through collective negotiations. This improves fund utilization efficiency and market competitiveness.

Diversified investment strategies ensure the safety of funds and asset appreciation, with strict adherence to risk management principles to minimize single investment risks. Particularly in regions with stringent capital controls, companies should demonstrate exceptional fund allocation capabilities, ensuring global fund security and liquidity. Companies should also promote market awareness and investor confidence in firms with stock prices below cash reserves through investor relations campaigns and investor roadshows.

Global Asset Allocation

1.    "The CATS strategy embodies the resilience of personal and family assets in the face of uncertainty."

In the context of globalization and economic uncertainty, personal and family asset management strategies require strong resilience and adaptability. This resilience is reflected in asset allocation strategies that protect and grow wealth through highly diversified investment approaches, mitigating market risks while ensuring asset appreciation.

2.    "Investing should focus on the quality of underlying assets, ensuring their diversification, essential nature, and cyclical resistance. Select assets that maintain demand even in extreme market fluctuations to ensure stability and risk resilience in your investment portfolio."

3.    In constructing a robust investment portfolio, the quality of underlying assets is crucial. Investors should carefully evaluate each investment's fundamentals to ensure that selected assets are diversified and can maintain value under different market conditions. Essential assets should retain demand even during economic fluctuations, and non-cyclical assets should exhibit stability across market cycles.

4.    "The third principle of investing is that the strongest will shape the future of capital markets."

In the future, key resources such as funds, talent, and projects will concentrate in leading economies, markets, and among top managers. It is advisable to focus on mature markets like the U.S. and Europe, as well as high-growth sectors like AI, technology, new energy, and semiconductors. Most importantly, invest in top managers and products to maximize returns.

5.    "In family management, it is often said that investment losses won't deplete your wealth, but splitting assets can leave you with nothing. Hence, family planning, trusts, insurance, and other aspects of family asset allocation, though less front-and-center than investments, are crucial."

In wealth management, insurance is not only a tool for risk management but also for wealth inheritance and tax planning. Life insurance, medical insurance, and other protections safeguard individuals and provide temporary cash flow, avoiding financial risks due to inadequate coverage. Trusts are excellent tools for asset protection and succession planning, ensuring property safety and effective inheritance. Trust structures allow for proper asset management and distribution, mitigating the risk of losing wealth in business operations or personal life.

These key insights undoubtedly spark curiosity about the engaging discussions behind them.

In upcoming sessions, Noah will present in greater detail the keynote speech by Mr. Ting Lu, Chief China Economist at Nomura Securities, during the "Corporate Expansion Practices" roundtable featuring senior executives from successful expansion companies, and the "Overseas Allocation Choices" roundtable with ARK executives and funding experts. Stay tuned!