Chinese companies seeking to buy assets abroad may be shifting their focus to Europe because political concerns are more muted on the continent than in the United States, bankers said yesterday at a Beijing conference on mergers.
"The next big chunk in mergers and acquisitions is in China and Europe," said Bank of China's Vice President Zhu Min. "People are still looking for technology before they look for markets and distribution."
Zhu's comment underscores the push by Chinese companies, including closely held Fanerdun Group, to put up factories and trade centers in Europe to sell consumer goods ranging from clothing to electronic appliances and toys. Ping An Insurance (Group) Co, China's second-largest insurer, agreed to buy half of the asset management unit of Brussels-based Fortis in March.
China's government, grappling to contain the world's largest foreign-currency reserves, which soared to a record US$1.68 trillion on March 31, has been prodding state-owned companies, including oil explorer CNOOC Ltd and smelter Aluminum Corp of China Ltd, to buy oil fields and mines abroad to feed industrial demand in the fourth-largest major global economy.
CNOOC may shift its attention to Africa and the Middle East, Chief Financial Officer Yang Hua said at a Shanghai forum on November 1, after the company's August 2005 attempt to buy California-based Unocal Corp was blocked by US lawmakers.
"The political backlash over CNOOC's Unocal acquisition was totally unexpected," said Goldman Sachs Group Inc's China Investing Banking President Cai Jinyong.
"Chinese companies will continue to look at overseas targets, but the success rate won't be very high because of the political and execution risks."
Former American Treasury Secretary John Snow called abandoned deals by CNOOC and DP World, owned by the Dubai government, to invest in the US "aberrations."
DP World forsook its bid to buy US ports after a 2006 congressional outcry.
"They don't reflect the mainstream of our behavior," Snow, now chairman of Cerberus Capital Management LP, the US$21-billion New York-based buyout firm, said at the Beijing conference yesterday.
Snow advised that to avoid political obstacles, Chinese companies looking to invest in the US should visit the congressmen and senators in the states where their target investments are located.
(Shanghai Daily June 13, 2008)
