11 December 2012
Following the implementation of the Implementation Opinions on Encouraging and Guiding Private Enterprises to Actively Conduct Overseas Investment and the announcement made on the newly-approved overseas investment, the overseas investment by Chinese enterprises will usher in an unprecedented period of rapid growth.
At present, China’s overseas investment is growing rapidly, which is rooted in Chinese enterprises’ unflagging pace of overseas expansion. The fast-growing overseas investment by Chinese enterprises presents the following new characteristics:
First, changes are taking place in investing entities, with investing entities conducting overseas investment extending from large scale state-owned enterprises to private enterprises. If the energy of this group for overseas investment is activated, it certainly will boost the domestic economy of China. In the meanwhile, it would be quite favorable to the domestic structural readjustment, industrial upgrading and the development of the emerging industries of strategic significance.
Second, in recent years, Chinese enterprises have expanded their sectors for overseas investment and mergers and acquisitions (M&As), with the M&As shifting from “hard” to “soft”. Previously the M&As basically focused on energy and resource sectors, but now they are extending to other sectors such as manufacturing and the financial service industry, and the content of the M&As are also extending from such energy “hardware” as mines to such “software” as brands, technology, etc.
The advantages of private enterprises to invest abroad lie in their flexible mechanisms, quick decision making and attractiveness to local governments. However, many problems and shortcomings persist in private enterprises’ “going abroad”, for instance, shortage of strength, lack of trans-national talent and lack of experience. Such problems and shortcomings result in lack of awareness of “cultivation” after going abroad, and therefore enterprises not only offend enterprises of the same trade, but also ruin their own brands and word-of-mouth, or, under some serious circumstances, even affect the awareness of the local community on the image of the Chinese enterprises as a whole. In this regard, it is possible for private enterprises to accomplish sustainable development in the local community only if they fully prepare at the time of “going abroad”.