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Changes in Chinese Companies’ Overseas Investments

Xinhua published an article which observed three changes have occurred in 2012 in Chinese companies’ overseas investments. First, there was a change in the investment philosophy from the time of start-up to merger and acquisition. If a Chinese company builds a new business in competition with existing traditional industries, clashes with those local businesses will likely occur; the Chinese business often becomes the “enemy” in the local community. Second, the sectors where investments are made appear to be more diversified, moving from the resources sector to the technology, brand name, and distribution sectors. There have been political complexities associated with the acquisition of resources overseas. These acquisitions have tended to occur in Africa and South America, and have brought geo-political risks that cannot be ignored. The acquisition of technology, brand name, and distribution businesses make up for the weakness in manufacturing in China and also can be easily accepted overseas. Thirdly, recent acquisitions have involved private equity (PE), which is viewed as good progress. With PE’s expertise in investment, their participation has enhanced the success rate of China’s acquisitions.

Source: Xinhua, February 12, 2012