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Conflict managment an important lesson for China's overseas buyout
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16:52, June 04, 2009

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The financial crisis did not change the trend of globalization; in fact it decreased the cost of investment thus creating an opportunity for Chinese enterprises to "go global." Chinese enterprises are making use of this opportunity, but they must learn how to manage cultural and business conflicts.

Although China has been impacted by the financial crisis, the country still has a good macroeconomic situation and sufficient foreign exchange reserves, while the international competitiveness and transnational management ability of Chinese enterprises have both been enhanced. This indicates that a good foundation has been laid for China to develop its investment in and cooperation with foreign countries.

Meanwhile, the number of opportunities for Chinese enterprises to merge high-quality enterprises and assets has increased, the cost of investment has lowered and transaction conditions have improved. Some countries hope that China can offer a wide range of diversified financing.

According to the statistics from China's Ministry of Commerce, in the first quarter of 2009 China invested in the establishment of 445 enterprises overseas, an increase of 6.8 percent compared to the same period last year. China's non-financial foreign direct investment reached 3.7 billion USD. Moreover, a large number of projects are currently being negotiated and implemented.

The latest example is that of General Motors (GM) which, having applied for bankruptcy protection has come to a preliminary agreement with Sichuan Tengzhong Heavy Industrial Machinery Co., Ltd. regarding the sale of its Hummer brand.

Chinese enterprises do not have a long history of investing and expanding overseas however and remain quite deficient in both strength and experience of international operation; thus, they still have a lot to learn.

Up to the end of 2007, China's non-financial foreign direct investment accounted for just 5 percent of the total global foreign assets, and only 25 percent of that of Japan, 10 percent of that of Germany and 5 percent of that of the US, indicating there are still large gaps between China and developed countries.

Experts advised that the post-merger integration of enterprises is in fact the real challenge. Integration is not a simple combination of finance and business; it also involves issues such as how to address enterprise management and cross-cultural conflicts.

By People's Daily Online


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