Bil­lion

China Daily (Canada) - - ANALYSIS -

Amount of non-fi­nan­cial

di­rect in­vest­ment by Chi­nese com­pa­nies in 2015

of the cases, Chi­nese com­pa­nies’ over­seas in­vest­ments are be­tween $100 mil­lion and $1 bil­lion.

“But the num­ber of smaller out­bound in­vest­ments (below $100 mil­lion) is grow­ing fastest, as pri­vate com­pa­nies and SMEs are play­ing a big­ger role,” he said, adding that in 2014, pri­vate com­pa­nies’ out­bound in­vest­ments grew 295 per­cent year-on-year, and they made up 69 per­cent of the to­tal num­ber of cases.

Xiao Qiang, di­rec­tor of the China Small and Medium-Size En­ter­prise In­sti­tute, said most SMEs that the in­sti­tute has helped go global have an­nual rev­enue of be­tween 50 mil­lion yuan and 400 mil­lion yuan and an em­ployee head­count below 2,000.

Of the to­tal, SMEs’ out­bound in­vest­ments ac­count for 30 per­cent of the value and 80 per­cent by num­ber of cases, he said.

Long Yongtu, for­mer vicem­i­nis­ter of com­merce, said the trend of Chi­nese com­pa­nies go­ing global is ir­re­versible. China’s cor­po­rate and pri­vate bank de­posits amount to more than 138 tril­lion yuan, and the abun­dance of cap­i­tal makes it eas­ier for Chi­nese com­pa­nies to in­vest over­seas.

“Glob­al­iza­tion is to al­lo­cate re­sources glob­ally.” he said. “If Chi­nese’ re­struc­tur­ing is con­ducted with a global scope, its eco­nomic trans­for­ma­tion would be less painful and is more likely to suc­ceed.”

Wang Chaoy­ong, founder and CEO of Chi­naE­quity Group, a ven­ture cap­i­tal in­sti­tu­tion, said there are three ways for Chi­nese com­pa­nies to go global: prod­ucts go­ing global; in­dus­trial ca­pac­ity go­ing global; and cap­i­tal go­ing global.

“I have ob­served huge changes in all th­ese three. In the prod­ucts I have seen qual­ity, added value and brands have im­proved greatly. In ca­pac­ity go­ing global, a big fea­ture is that, be it a stated-owned com­pany or SME, they co­op­er­ate and form clus­ters to ex­plore over­seas mar­kets.”

For cap­i­tal go­ing global, Chi­nese in­vestors in the past would typ­i­cally buy US trea­suries, Euro­pean govern­ment bonds or some blue chips, but now pri­vate equity and ven­ture cap­i­tal have be­come the main av­enues for cap­i­tal go­ing global.

“The num­ber of over­seas merg­ers and ac­qui­si­tions is also in­creas­ing rapidly, through which many com­pa­nies are able to get over­seas prod­ucts, tech­nol­ogy, sales chan­nels, de­sign and so on,” he said.

A re­cent ex­am­ple is Shen­zhen El­las­say Fash­ion Co Ltd, a high­end cloth­ing com­pany, which bought a Hong Kong com­pany that owned the Ger­man fash­ion brand Lau­rel for 11.18 mil­lion euros ($12.22 mil­lion) as part of its global ex­pan­sion. The takeover

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