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Chinese businesses ought to do better in overseas M&A

By Cui Peng, Jiang Shengyang (People's Daily)

16:46, September 15, 2011

Edited and Translated by People's Daily Online

China's outbound direct investments made up 5.2 percent of the world's total in 2010, ranking fifth around the world. Reporters interviewed officials at the Ministry of Commerce and some insiders on the problems faced by the Chinese enterprises when "going global".

Shen Danyang, a spokesperson of the Ministry of Commerce, said that China should dialectically treat the impact of the U.S. and European debt crises on global investments. However, the global economic situation is generally good for Chinese enterprises to "go global".

Wang Shengwen, deputy director-general of the Department of Outward Investment and Economic Cooperation of the Ministry of Commerce, said that many countries across the world adopted a series of economic stimulus measures to cope with the crises.

Developed countries are making efforts to develop new industries, for instance, new energy, while developing countries invest heavily in infrastructure such as railroads, highways, bridges and ports, both of which have provided Chinese enterprises with new opportunities to expand overseas investments and cooperation.

It is worth noting that China's investments in the European Union have been on the rapid rise with a year-on-year growth rate of 280 percent in 2009, 101 percent in 2010 and up to 100 percent in the first half of 2011. The investments are mainly in countries such as Luxembourg, Germany, Italy, Netherlands and Spain.

"This shows that there is demand in the European Union. Enterprises will actively take actions after they find good opportunities in the market," Shen said.

Shen believed that European debt crisis is not the main reason behind the significant increase in Chinese enterprises' investment in Europe. Before the outbreak of European debt crisis, the European investment volume of Chinese enterprises had surged. From now on, more and more EU countries, enterprises and the public will notice the benefits brought about by Chinese investment, and the investment volume will maintain rapid growth.

Shen denied that the failure rate of Chinese enterprises’ overseas mergers and acquisitions is high. Shen said that it would take more than ten years to judge whether mergers and acquisitions are successful or not, and it is not right to rush to a conclusion.

According to data from the Ministry of Commerce, the delivery volume of Chinese enterprises' overseas mergers and acquisitions reached nine billion U.S. dollars, and three of the projects amounted to as much as 6.2 billion U.S. dollars.

It is true that Chinese enterprises should improve themselves when going global. Compared with large European and American transnational enterprises, most of Chinese enterprises going global are low and middle-end industries. Most of them are traditional contractors. Their primary businesses do not involve science and technology as well as high added value, which make them short of core competitiveness.

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