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People's Daily Online>>China Business

Unity is the key for China's top private firms

(China Daily)

13:54, November 25, 2011

BEIJING - Some of China's largest private companies have decided to unite to develop overseas markets, as an increasing number of them aspire to develop into global players.

The China International Chamber of Commerce for the Private Sector (CICCPS) was established in Beijing on Thursday. It has more than 100 members, including some of the country's biggest private companies, such as Geely Automobile Holdings Ltd, the auto giant that bought Sweden's Volvo AB last year, and New Hope Group Ltd, China's largest producer of animal feed.

The aim of the CICCPS is that private companies will help each other in overseas investment, including the provision of coordination between domestic and foreign government agencies, and in setting up platforms to obtain financing.

"Internationalization has become the strategy for many Chinese companies," said Zheng Yuewen, chairman of the organization. "They need to develop on a global scale and be internationally competitive."

The country's 7.5 million private-owned companies have become a major force in overseas investment. In the next three years, one-third of them will set up sales networks overseas and a quarter of them will establish offices in other countries, according to Guo Guangchang, chairman of Fosun International Ltd, one of China's largest conglomerates.

The private enterprises might also be able to benefit from China's vast foreign-exchange reserves when making overseas investments, according to some members. So far, the foreign-exchange reserves - totaling more than $3 trillion - have mainly been used to aid the overseas expansion of State-owned companies.

"The investment of our foreign-exchange reserves should be more diversified, and private business is an important channel," said Wu Xiaoqiu, director of the Financial and Securities Institute of Renmin University of China.

"Private companies have more advantages in their decision-making systems, and they are also better at executing plans compared with State-owned enterprises," said Wang Jianxi, executive vice-president and chief risk officer of China Investment Corp, the country's sovereign wealth fund.

The overseas development of Chinese private enterprise has already attracted foreign investors. In July, the British financier Jacob Rothschild said that his RIT Capital Partners will set up a private-equity fund of $750 million with members of the CICCPS to aid the development of Chinese companies overseas.

Many of the country's private enterprises compete with each other at the low-end while doing business overseas, said Yin Mingshan, chairman of Lifan Industry (Group) Co Ltd, a leading motorcycle manufacturer. "They compete by offering the lowest price possible, and hurt each other as a result. Joining the chamber will make them more self-disciplined," he said.

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