It’s not just Chinese State-owned behemoths grabbing the headlines for their global acquisitions; smaller companies are making waves, too, says Chen Yingqun.
China’s most important holiday, the lunar new year, is drawing near but entrepreneur Shu Wenbin has no intention of relaxing and taking time out to party. Instead, it is his busiest time of the year.
Apart from meetings with potential partners across China, the general manager of Continental Interior Design and Construction Ltd also plans trips to the United States and other markets to seek out business opportunities he may be able to seize after the holiday.
“China’s real estate and construction industries have slowed down in the past two years, new residential and commercial projects are seeing sluggish growth, and investment prospects are uncertain,” he said.
“Overseas markets, especially in Southeast Asia and South America, will be new growth points. Prospects in European and US market are also good.”
Shu’s company, which offers interior design and construction services, started its overseas business in 2012, through its partners, big Stated-owned enterprises operating overseas. The company has about 150 employees and annual revenue of about 300 million yuan, of which about 20 percent is from overseas.
It used to enjoy about 30 percent annual growth on average but in the past two years, with slower growth in the construction sector and rising labor and material costs, searching for new opportunities globally has been an attractive option.
“We plan soon to set up a company and operate directly overseas, and I want half the company’s revenue to come from overseas by 2017,” he said.
Shu is typical of Chinese small and medium-sized enterprises that are increasingly going global at a time when the government is accelerating economic restructuring and easing restrictions on overseas investment.
Headline-grabbing mergers and acquisitions by Chinese enterprises of totemic companies in the West suggest an invasion but it was only in 2014 that China’s outbound investment reached $140 billion, for the first time overtaking inbound investment of $120 billion. Chinese President Xi Jinping also predicted in 2014 that China’s would see Ellassay owning Laurel’s design, pricing and production rights at all its stores on the Chinese mainland.
A recent report from Dealogic, an international information provider on investment deals, said Chinese outbound M&A volume increased for the sixth consecutive year to a record high of $111.9 billion last year, breaching the $100 billion mark for the first time.
A recent report by Boston Consulting Group shows the changing trends in Chinese overseas M&As. From 1990 to 2014, about 40 percent of M&As were in energy and resources. But in recent years, only about 20 percent of M&As involved energy and resources, while about 75 percent were in technology, brands and market share.
Manufacturing is an important sector that has drawn the attention of Chinese entrepreneurs, who are encouraged by the Made in China 2025, China’s national strategy to upgrade its manufacturing sector.
Figures from the Ministry of Commerce show that from January to November 2015, outbound investment in the manufacturing sector was about $11.8 billion, a year-on-year increase of 95.4 percent; in equipment manufacturing $5.89 billion, a year-on-year rise of 117.3 percent.
“Germany and the US, whose manufacturing is most advanced, have become targets for Chinese companies,” Wang of the CCG said.
Joyson Electronics, an auto parts making company in Ningbo, is a typical investor in Germany’s high-end manufacturing. The company was established in 2004, and since 2011 has bought four German companies in auto, software, robots and auto parts sectors. It now has about 20 production and sales bases and four research centers globally, and is a supplier for top car brands including Audi, BMW and Mercedes Benz.
“SMEs should go global instead of just doing business at home, otherwise they will be sifted out. Overseas M&As could be a good way, ” said Wang Jianfeng, president of the company.
Contact the writer at chenyingqun@chinadaily. com.cn
Models show off Ellassay Fashion Co’s latest garments in Beijing in October.