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 Daily (Canada) - - ANALYSIS -

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.


Mod­els show off El­las­say Fash­ion Co’s lat­est gar­ments in Bei­jing in Oc­to­ber.

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