Main­land firms snap up HK as­sets

Hong Kong has seen an ex­pan­sion of in­vest­ment and ac­qui­si­tions in sec­tors such as re­tail, prop­erty and bank­ing, re­ports Oswald Chan.

China Daily (Hong Kong) - - BUSINESS -

While some Hong Kong­based blue- chip com­pa­nies are sell­ing their lo­cal busi­ness as­sets, a spate of main­land en­ter­prises are ex­pand­ing into the city’s re­tail, prop­erty and bank­ing sec­tors in search of busi­ness di­ver­si­fi­ca­tion.

Main­land­based re­tail and beer con­glom­er­ate China Re­sources En­ter­prise Ltd con­firmed at a July 21 news con­fer­ence that it has sub­mit­ted a bid for ty­coon Li Ka- shing’s Hong Kong su­per­mar­ket chain at a “rea­son­able price”. CRE Chief Fi­nan­cial Of­fi­cer Frank Lai added that CRE may part­ner with United King­dom-based gro­cery chain Tesco PLC to bid for Hutchison Wham­poa’s ParknShop su­per­mar­ket chain.

CRE said that it may raise debt and does not rule out sell­ing “non-core” as­sets to fund the ParknShop pur­chase. The sale of the lo­cal su­per­mar­ket gro­cery chain will fetch an es­ti­mated $3 bil­lion to $4 bil­lion.

In the prop­erty sec­tor, main­land prop­erty de­vel­op­ers have be­come more ag­gres­sive when bid­ding for land parcels in Hong Kong since 2012. China Over­seas Land and In­vest­ment Ltd suc­cess­fully grabbed two land parcels in the Kai Tak re­gion, whereas the Hong Kong govern­ment spec­i­fied that prop­erty de­vel­op­ers can sell the res­i­den­tial flats built on those two parcels only to Hong Kong per­ma­nent res­i­dents.

Main­land flag­ship prop­erty de­vel­oper China Vanke Co, in co­op­er­a­tion with Hong Kong blue-chip de­vel­oper New World De­vel­op­ment, also suc­cess­fully bid for a land par­cel in Tsuen Wan early this year. Vanke said that its in­ter­ests in the Tsuen Wan par­cel will be in­jected into its lo­cally listed sub­sidiary, Vanke Prop­erty Over­seas.

In the bank­ing sec­tor, main­land busi­ness con­glom­er­ate Yuexiu Prop­erty Co Ltd was re­ported as one of the bid­ders for the Hong Kong-based Chong Hing Bank.

The main­land com­pa­nies are seiz­ing the op­por­tu­ni­ties to “go out” since the fi­nan­cial cri­sis of 2008. Ex­ter­nally, de­vel­oped and de­vel­op­ing economies have a huge de­mand for over­seas cap­i­tal, mak­ing over­seas en­ter­prises more re­cep­tive to Chi­nese ac­qui­si­tions. In­ter­nally, the need to ac­quire mar­kets, re­sources, tech­nolo­gies and brands as well as to slash costs re­quire Chi­nese en­ter­prises to “go out” on a larger scale.

How­ever, the over­seas ex­pan­sion tra­jec­tory is never easy. Ex­ter­nal chal­lenges stem from ris­ing over­seas in­vest­ment pro­tec­tion­ism and in­creas­ing global in­vest­ment mar­ket risks. In­ter­nal chal­lenges emerge from main­land en­ter­prises’ scarcity of in­ter­na­tional man­age­ment ex­pe­ri­ence, in­ad­e­quate as­sess­ment of the global in­vest­ment en­vi­ron­ment, and a lack of in­ter­na­tional tal­ent.

Due to the nu­mer­ous ob­sta­cles the main­land faces when ex­pand­ing over­seas, main­land com­pa­nies may now find Hong Kong to be an at­trac­tive spring­board.

Ac­cord­ing to China CITIC Bank In­ter­na­tional Ltd, Hong Kong plays the ir­re­place­able role of pro­vid­ing a bridge for “go­ing out” Chi­nese firms. This is be­cause Hong Kong prac­tices a high de­gree of open­ness and freedom in its in­vest­ment poli­cies, and has low cap­i­tal con­trols, low taxes and a wealth of pro­fes­sional-ser­vices tal­ent.

“The main­land en­ter­prises should fur­ther lever­age off this bridg­ing role of Hong Kong for their large-scale ‘go­ing-out’,” China CITIC Bank In­ter­na­tional Chief Econ­o­mist Liao Qun said.

“Mean­while, Hong Kong should en­hance its role as the bridge, steer clear of neg­a­tive ele­ments that are un­fa­vor­able to the city’s eco­nomic de­vel­op­ment, and be­come more open, free and ef­fi­cient,” Liao added.

Daniel Poon, the Hong Kong Trade De­vel­op­ment Coun­cil’s prin­ci­pal econ­o­mist, also was op­ti­mistic about the ben­e­fit of Hong Kong to main­land busi­nesses. “With el­e­gant his­tor­i­cal jux­ta­po­si­tion, Hong Kong has moved from be­ing solely a gate­way for for­eign in­vest­ment in China to also be­ing a spring­board for China’s in­vest­ment in the rest of the world,” he said.

Many for­eign in­vest­ment en­ter­prises are still large Sta­te­owned en­ter­prises from the main­land, but the num­ber of pri­vate en­ter­prises is steadily in­creas­ing.

The Hong Kong govern­ment said the main­land was the most im­por­tant source of di­rect in­vest­ment in Hong Kong. The ma­jor­ity of the stock of in­vest­ment was re­lated to ser­vice in­dus­tries, in­clud­ing in­vest­ment and hold­ing, real es­tate, pro­fes­sional and busi­ness ser­vices; bank­ing; and im­port/ex­port, whole­sale and re­tail trades.

The HKTDC fig­ure shows that the main­land’s cu­mu­la­tive in­vest­ment in Hong Kong amounted to $261.5 bil­lion at the end of 2011, ac­count­ing for 61.6 per­cent of the main­land’s to­tal out­ward FDI.

Be­cause of the in­ter­na­tional busi­ness en­vi­ron­ment of Hong Kong, the city is a highly at­trac­tive mar­ket for for­eign di­rect in­vest­ment. Hong Kong’s global FDI in­flows ranked third in 2012 ($ 75 bil­lion), af­ter the United States ($167.6 bil­lion) and the Chi­nese main­land ($121.1 bil­lion), ac­cord­ing to the UNC­TAD World In­vest­ment Re­port 2013.

The main­land is poised for fur­ther over­seas busi­ness ex­pan­sion in the fu­ture as the coun­try’s en­ter­prises still have a huge ap­petite for over­seas tech­nol­ogy, man­age­ment skills and brand ac­qui­si­tions. Con­tact the writer at oswald@ chi­nadai­


Main­land-based re­tail and beer con­glom­er­ate China Re­sources En­ter­prise Ltd con­firmed it has sub­mit­ted a bid for ParknShop, ty­coon Li Ka-shing’s Hong Kong su­per­mar­ket chain, at a “rea­son­able price”. CRE said it may part­ner with United King­dom-based Tesco PLC on the pur­chase.

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