Chinese firms take initiative overseas

Source:Global Times Published: 2015-5-19 21:08:01

Companies eyeing opportunities in wider range of sectors


Teresa Ko Photo: Courtesy of Teresa Ko


 

Editor's Note:

Last year, the central government called on Chinese companies to invest in overseas projects. "Opportunities are hard to find and easy to lose," President Xi Jinping said in a speech, noting that as the economy moves into a "new normal" period, Chinese companies should take more initiative in exploring international markets. The launch of the "One Belt, One Road" initiative has also opened up new opportunities for Chinese investors who want to invest abroad. Global Times reporter Xie Jun (GT) recently interviewed Teresa Ko (Ko), China chair of Freshfields Bruckhaus Deringer, a multinational law firm. Ko shared her thoughts on the potential investment destinations and sectors. 

GT: China's economy is facing downward pressure at the moment. Does that affect the strength and methods of overseas investment by domestic investors?

Ko:
The pressure on the domestic economy necessarily affects overseas investment, and has reduced the number of deals being done.

But it also means there are new opportunities. For instance, the slump in oil prices could lead to investment opportunities with oil services companies.

Also, the current economic situation will lead Chinese firms to be more selective, and they will have to approach the investing process in a more focused and discerning way.

GT: Do you think now is a good time for overseas investment?

Ko:
There are certain conditions for investing in overseas projects. The first is availability.

Opportunities for the  investment you want to make must be available, and nowadays, with the recent global financial crisis and the relative health of the Chinese economy, there are assets available overseas for Chinese investors.

The second condition is financial capability. Chinese companies have strong buying power at present, and we have seen a lot more overseas buying activities than, say, 10 years ago.

The third is experience. Over the years, Chinese investors have become much more savvy about the acquisition process and have attained a lot of experience.

China's overseas investment sector is coming of age, and I believe this is just the beginning of an era.

More and more Chinese companies will participate in overseas investment in the future.

GT: Which places have been the hottest investment destinations for Chinese investors in recent years?

Ko:
Based on a report that Freshfields put together in 2013, Chinese companies made up the third largest group of investors in Africa, with more than $20 billion of African acquisitions in the previous decade. I can back those statistics up with an anecdote.

My son has spent nearly a month in Zimbabwe. He has traveled the country on public transport, and every time he got onto a minibus, he was always invited to take the front seat next to the driver. Why? Because there are so many Chinese people who have invested in the country. Chinese people are welcomed by the local people.

Investment in Europe has also featured prominently, particularly in infrastructure and the real estate market.

The investment from China in the US has also been very strong, but I don't think Chinese investors are limiting themselves to just these places.

GT: What places are likely to attract Chinese capital in the future?

Ko:
The "One Belt, One Road" initiative has opened everybody's eyes to investment opportunities in nearby countries such as Indonesia and Vietnam. I expect Southeast Asia will become a hot new destination for capital from China.

GT: You mentioned the "One Belt, One Road" initiative. How can companies, especially private companies, actively participate in such a campaign?

Ko:
Private companies tend to have less resources available to them than the powerful, State-owned companies, so I think they may not be as active as you would expect in overseas investment.

But still I have seen quite a few Chinese private companies considering investments in countries related to the "One Belt, One Road" initiative.

Some of them already have businesses in those regions, and it might be easier for them to kick-start investment projects for that reason.

GT: China's investment in overseas projects is said to be concentrated in only a few sectors, such as real estate. Do you think that will change in the future?

Ko:
As a result of the global financial crisis, the price of physical assets has come down a lot, and you can get very attractive yields from them.

That's why many Chinese companies invested in the overseas real estate market. The industry has been a pretty safe bet for Chinese investors, and I believe it will continue to be attractive to them.

On the other hand, Chinese investors are also seeking new targets. In 2014, agriculture was a new favorite. COFCO group acquired a 51 percent stake in Noble Agri Ltd from (Hong Kong-based) Noble Group, and I assume there will be more acquisitions in this sector in the future.

Financial services will also become a popular area, as many domestic asset management companies are looking for overseas partners who can help them develop the market in China and overseas. Areas like infrastructure, aviation, and consumer goods are also likely to provide opportunities for Chinese investors in the next year or two.



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