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Chinese enterprises active in global restructuring
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17:04, June 04, 2009

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Chinese enterprises should better prepare for integration

Conflict managment an important lesson for China's overseas buyout

Although the international financial crisis came in full fury, Chinese enterprises have not slow down the pace of participating in the global industrial restructuring.

On June 3, GM released the news that it has reached a preliminary agreement with Sichuan Tengzhong Heavy Machinery Co. Ltd, planning to sell the Hummer Brand to this Chinese company.

According to statistics from Ministry of Commerce, in the first quarter, China invested to establish 445 companies overseas, the figure has increased 6.8% year on year. China’s non-financial direct foreign investment reached 3.7 billion USD. In addition, a number of major projects are under negotiation.

Official with the Ministry of Commerce said that the international financial crisis caused a profound adjustment of the world’s economic structure. However, the general trend of economic globalization can not be reversed.

Chinese enterprises are now in a very important strategic period of chasing opportunity. It can be seen that opportunities of investing in high quality enterprises overseas have increased, investment costs were reduced and trading conditions were also improved. Some countries expected China to provide a wide range of financing.

Although affected by financial crisis, China’s macroeconomic is still in a good state: adequate foreign exchange reserves, improvement of international competitiveness and management capacity of Chinese enterprises, good development base to carry out investment cooperation overseas.

At present, China’s capacity for foreign investment is continuing to increase. Investment types are expanded in various forms including cross-board merger and acquisitions, equity participation and entering overseas markets.

There was still a wide gap between China and developed countries. As of the end of 2007, China’s direct foreign investment only accounted for 5 percent of the entire global foreign assets, which was equivalent to 1/4 of Japan’s, 1/10 of Germany’s and 1/20 of the US’.

Professor Zhao Xijun, vice president of the School of Finance in Renmin University believed that it was an inevitable trend for Chinese enterprises to participate in the global industrial restructuring when China’s economy developed to a certain degree.

But he also warned that the real challenge was the integration that comes after the acquisition. Integration is not just a simple integration of financial and business, but includes how to solve problems such as conflict management and cross-cultural conflict.

Chinese enterprises are still at the initial stage of investment overseas and lack international business experience. There is still large scope for improvement.

By People's Daily Online

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