Liu Qiao: Encouraging companies to "go global" should increasingly become an investment-oriented mindset.

Ask AI · How Can Liu Qiao’s Investment Thinking Break the Business Low-Profit Trap?

On March 25, Liu Qiao, Dean of the Guanghua School of Management at Peking University, said at the Boao Forum for Asia that China’s biggest structural problem now is that companies get trapped in a structural cycle of low prices, low profits, and low revenues, making things very hard.

“What we need to think about more is how to raise product prices, rather than getting stuck in the low-price competitive advantage brought by cost advantages.” Liu Qiao suggested that companies should consider moving toward higher-end segments, reconfiguring the value chain and industrial chain, and extending upward into higher-end areas. China’s manufacturing sector in the future needs to focus on how to become a strong country of brands and quality—obtaining pricing power premiums from brands and quality—which will help break the structural cycle of low prices, low profits, and low revenues.

He pointed out that, indeed, anti-“involution” is still necessary to resolve low-efficiency capacity. “The capital market can play a bigger role, using means such as mergers and acquisitions to absorb excess capacity. At the same time, the behavioral patterns of local governments may also need to be adjusted: for local government performance evaluation, instead of relying more on GDP indicators, it could shift more toward consumption, income, and so on. This would help address excess capacity.”

In addition, Liu Qiao believes that it is necessary to encourage companies to “go global.” This should not be the previous simple transactional mindset—exporting products. Instead, it should become more of an investment mindset—building the value-chain layout across the globe, rather than simply moving the destination for product exports overseas.

“What is happening now is that many companies have also found that profit margins in overseas markets are higher. Based on our statistics in the manufacturing sector, in many industries, the profit margins in foreign markets are 5 to 6 times those in China. In this situation, overseas investment has greater long-term development value for companies. This time’s ‘going global’ is different from the past: it is limited to a form of long-termism and an investment mindset. Each finds beauty in what it loves, each finds beauty in beauty, and we all share beauty together so that all under heaven can be harmonious.” Liu Qiao said.