Could Chinese companies be more successful in overseas wooing?

17:16, February 25, 2011      

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Chinese enterprises seem to be the least successful group in the world in overseas mergers and acquisitions. Host countries' concerns over national security are the biggest hurdles that Chinese buyers have been facing. But behind that, said analysts, lies the fear of a rising China.

Statistics released by Dealogic, a leading international financial data provider, show that 12 percent and 11 percent of the cross-border takeover attempts by Chinese companies failed in 2009 and 2010, respectively — the highest in the world. The figures for American and British companies were only 2 percent and 1 percent in 2010.

The latest example is Huawei, one of the top telecom facilities and service suppliers based in Shenzhen with global operation. It has declared it will give up its attempted acquisition of the U.S. hi-tech company 3Leaf Systems for 2 million U.S. dollars after refusing to shed its technology assets bought from 3Leaf. The Committee on Foreign Investment in the United States (CFIUS), an agency for the security assessment of foreign investment in the United States, launched the review of Huawei's buyout at the request of Pentagon in November 2010.

The same security concern has been cited by the United States and other countries like Australia when giving negative responses to several other acquisition cases by Chinese companies, particularly those involving hi-tech assets.

Xie Mingdun, a lawyer in Beijing, thinks that the U.S. blockage targeting buyouts by Chinese companies reflects the competition between the two countries in the high tech industry in the context of the rise of China. And he warns that cases similar to Huawei's would happen again in the future as the United States will keep highly alert over any competition from China in the hi-tech sector.

Some other analysts suggest that the Chinese government and enterprises step up efforts to communicate with host countries and do more on Chinese companies' commitments on social and environmental responsibilities as well as improve compliance in overseas investment. Thus, they hope, the concerns and resistance of host countries could be eased.

Huawei also expressed its confidence on expanding its presence in the U.S. market. A ruling by a Chicago court has barred Motorola from disclosing Huawei claimed trade secret and intellectual property rights to Nokia Siemens. The fairness in that case, said Huawei, is the long-term foundation for the extensive business cooperation between Huawei and its American partners.

By Li Jia, People’s Daily Online

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