Money From China?
David Mao is an attorney with Shanghai Pioneer Law Office, and business often brings him to Honolulu. His practice focuses on foreign companies investing in China, but yesterday he spoke about China’s outbound investment plans. We have seen headlines about Chinese takeovers in resource industries, but there is much else under the surface. China’s outbound investment reached $55.6 billion in 2008, a 19.4% increase over the previous year. Mao suspects it won’t be long before outbound investment tops $90 billion annually.
David Mao
China is swimming in foreign exchange and the urge to do something with all those dollars, yen, pounds and euros is irresistible, so the likely targets for investment are moving beyond just resources. Mao says Chinese companies are going after light manufacturing (such as apparel, machinery, home appliances and electronics), construction and labor services, agriculture, high tech (who isn’t?) and transportation. More surprising targets include a heavy emphasis on acquiring existing brand names and market share in foreign markets, as well as an interest in business service companies (trading, distribution, insurance, finance, logistics, tourism and media).
Experienced with both Chinese and U.S. companies, David anticipates collisions between western and Chinese management styles. He cited the takeover of Hoku Scientific by Tianwei New Energy Holdings that will leave a majority of board members from China while the company operates in Hawaii and Utah. On the plus side, he noted that U.S. business visas (staff, B1 and B2) have been easier to get in Shanghai.
There are at least a couple of things China won’t be getting into. I asked him about prospects for direct investment in world equity markets. Not going to happen quickly, for fear that Beijing will lose control of outbound investment. Similarly, though there is strong interest in getting into overseas property development, Beijing is leery that this would suck foreign exchange out of China faster than they would like. It’s all about control, folks.
