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'Golden period' for Chinese investment

Publication Date : 30-09-2012

 

Chinese enterprises have entered a "golden period" of overseas expansion, with investments increasing, and mergers and acquisitions on the rise, according to report released by a Beijing-based research institute.

Launching its findings in Stuttgart, Germany - one of China's key target markets for outbound investment - Du Liang, director of the China Entrepreneur Research Institute, said official figures show that from January to July this year, overseas investment by Chinese companies reached US$42.2 billion, a 52.8 per cent growth year-on-year.

He said that the Chinese government's favourable policies aimed at encouraging firms to expand internationally, the chronic European sovereignty debt crisis, and the appreciation of the Chinese currency have all combined in helping the boom in overseas expansion by Chinese businesses this year.

However, Du issued the good news with a warning too: "I am afraid the process of internationalisation by Chinese enterprises will not be as smooth in future", adding that some advanced economies may slam their doors shut to Chinese businesses, if their economies start to improve.

"I can't predict how long this golden period will last, because the whole effort might be interrupted, once the economic climate in advanced economies starts to recover," said Du.

In the institute's report, his team concluded that 2012 has been a milestone for Chinese businesses overseas, as it praised the government's efforts at encouraging business to broaden their horizons and seek opportunities around the globe.

The latest ministry of commerce figures showed that Chinese investors have expanded their businesses into 2,407 companies in 117 countries and regions worldwide from January to July, as total outward outbound direct investment (excluding those in finance) hit $42.2 billion during this period.

During the first half of the year, there were 117 merger and acquisition deals conducted by Chinese investors overseas, worth a total of $30 billion.

The institute also compiled a top 50 list of the most internationally ambitious Chinese enterprises, according to their overseas strategies, corporate governance provision, supply chains, capital flows, brands, R&D and social responsibility activities, and profits.

The top five were IT giant Lenovo Group, information and communication supplier Huawei, electronic appliance producer Haier Group, and oil giants CNOOC Ltd and China Petrochemical Corporation (Sinopec Group).

The institute also found that the most common sectors involving overseas Chinese investment were energy and mineral mining, information technology, and household appliances. While the agriculture and medical sectors were highlighted as the least outward looking.

The institute also unveiled China's top 10 M&A deals during the January-August period, the biggest being CNOOC's $15.1-billion takeover of Canada's Nexen Inc in August.

"What surprised us most was the amount of international activity by Chinese businesses in the entertainment and cultural sectors," said Du.

The highlight deal in that sector was Chinese conglomerate Dalian Wanda Group's buying of US cinema chain AMC Entertainment for $2.6 billion, making it the world's biggest operator of movie theatres.

The report also noted particularly strong interest by Chinese enterprises in the financial services and machinery sectors.

Du added: "In M&A, especially in the machinery sector, Chinese enterprises have been eying European targets, and obviously Germany, hence the reason we have launched the report here."

To coincide with the report's release, the research institute was leading a team of privately owned Chinese enterprises that were actively looking for cooperation opportunities in Germany.

"We always equate 'made-in-Germany' with high quality," said Wang Zhanfu, president of Kangjie, China's leading furniture company.

"For fast-growing small and medium-sized enterprises like mine, cooperation with German businesses will bring us a more competitive edge."

 

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