Government encourages Chinese companies to boost investment abroad
Chinese firms are set to launch an intensified wave of takeovers and investments in Europe and other regions as the government seeks to increase China’s presence in financial markets worldwide, according to a study by HSBC.
Policy makers are encouraging Chinese companies to invest more heavily in foreign companies, particularly in Europe, to expand the nation’s portfolio and direct investment assets, which account for only 6 percent of the world’s total, while the country’s economy accounts for 12 percent of global GDP, according to HSBC.
‘China’s switch from growing exports to promoting domestic market growth is leading to a wave of outward investment by Chinese firms,’ writes Che-Ning Liu, HSBC’s co-head of banking for Asia-Pacific, in the report. ‘The policy change is increasing China’s appetite for technology, brands and resources such as labor and capital.’
Chinese firms are particularly attracted to Europe, which was home to 120 takeovers by Chinese firms last year. Germany proved the most popular destination, as Chinese companies took over 25 German firms. Overall, Chinese investment in Europe nearly tripled last year.
‘Private enterprises, rather than state-owned enterprises, have been the main Chinese buyers of European businesses,’ the report notes. ‘Acquiring well-known brand names is a way for Chinese companies to access new markets, obtain new technology and broaden their expertise.’
Last year, China’s Haitong Securities moved to take over Portugal’s Banco Espírito Santo de Investimento, Sanpower took over UK department store chain House of Fraser, Shenzhen Jiawei Photovoltaic Lighting Co bought Denmark’s Lion & Dolphin, and Chinese audio equipment maker GoerTek bought Danish firm Dynaudio.
HSBC says the liberalization of the Chinese currency will make takeovers abroad by Chinese firms easier in the future, helping pick up the pace of Chinese expansion in Europe and elsewhere.
