China Goes Abroad: Challenges and Opportunities

Europe has emerged as a key destination for Chinese outbound abroad. In the second quarter of 2012, the region received US$5 billion in investment - up from US$ 1.7 billion in the first quarter - and accounted for 48 percent of all mergers & acquisitions and 95 percent of all non-resources deals.

Indeed, Chinese companies are diversifying their investment profiles worldwide into a range of industries beyond the traditional outbound areas of energy and natural resources. This reflects the range of experience and goals among investors in the People’s Republic of China (PRC): while some are seeking to increase their market share or procure a steady supply of raw materials, other investors are aiming to expand their knowledge base, acquire new technologies, expand their business scope and/or tap new markets for their products.

The challenges for outbound investors

In undertaking an outbound investment project, Chinese companies and individuals are inevitably faced with challenges at each stage in its lifetime. These range from fundamental matters such as understanding the language and culture of the target jurisdiction, to complex matters such as how to work with local management personnel, how to finance business development, how to operate within the local legal framework, and how to resolve disputes. As with any area of business, the details of every transaction are different and present a unique set of issues to address.

It is particularly critical to conduct solid due diligence at the beginning of a project, to understand the tax implications of an investment, and to have access to knowledgeable consultants and legal advisors. As has been well-reported, it is also often the case that Chinese investment in foreign countries or new industry sectors face resistance by local officials or community groups. It is thus critical that new projects have the right government relations and public relations strategies, so that relevant stakeholders are informed and on board with the new Chinese partners.

Working towards a solution

Jesse Chang, Managing Partner of the Chinese firm TransAsia Lawyers, has advised on PRC-related investments for nearly 30 years. While representing Chinese clients with regard to their outbound investment projects, Jesse realized that there was no comprehensive, convenient source of information for investors to consult about the questions and challenges that they face in “going abroad”. Together with his colleagues from TransAsia’s outbound investment practice, Jesse has launched ChinaGoAbroad.com (CGA), a unique platform dedicated to providing practical, authoritative data to PRC investors.

CGA was co-founded by TransAsia and the China Overseas Development Association (Association) under the National Development & Reform Commission (NDRC, the PRC ministry in charge of inbound and outbound investments). The Association joined the project after the NDRC decided that CGA’s website was not only useful, but was critical to the success of Chinese investments abroad.

The NDRC’s endorsement of CGA followed the appointment of Mr Zhang Guobao as the new President of the Association. Mr Zhang was formerly the Vice Chairman of the NDRC and head of the National Energy Bureau. His appointment reflects the importance to the NDRC of outbound investments, and how CGA is aligned with the Association’s mission to support such transactions.

CGA offers a rich resource for outbound investors from China, including:

  • Information about the different stages of an overseas transaction, from inception to exit, from leading international service providers
  • Information about specific industries worldwide which are of particular interest to Chinese investors (including energy, natural resources and agribusiness) from experts in each field
  • Details of actual investment opportunities around the world (public and private sectors)
  • The ability to connect directly to the service providers, experts and asset owners who provide the above information
  • Opportunities to make connections during workshops, conferences and other events

The platform also enables service providers and industry experts to reach out to one another offline and form strong teams to support Chinese companies in “going abroad”, offering seamless advice across different jurisdictions. Although CGA is still in its soft launch period, this capability is already proving effective in several important ongoing transactions. Thus, both online and offline, CGA is helping to provide Chinese investors with a place where they can “meet the world”.

For more information about CGA, please visit www.ChinaGoAbroad.com or www.gcpr.net.

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