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Chinese companies have revealed their international ambitions as they have merged and bought out foreign partners last year, a trend that peaked with the merger between Lenovo Group and IBM.
Chinese companies have made 326 deals with a total value of 18 billion dollars in the first 11 months of 2004, up from six billion dollars in 2003, a survey by audit firm KPMG showed.
"Such strong growth can be attributed to China's economic reforms, WTO entry, opening up of the domestic market to foreign investors and strong growth of China's economy," KPMG said in a statement.
On December 8, 2004, Lenovo shocked the world when it announced the purchase of IBM's global PC operations at a price of 1.75 billion dollars in cash, stock and debt, making it the world's No.3 personal computer business maker.
Earlier last year, TCL, China's electronics maker claimed a 55-percent stake in a 100-million-euro (119-million-dollar) joint venture with French telecommunications giant Alcatel.
The Chinese firm has the option to swap Alcatel's holdings in the company into TCL shares when the venture turns five-years-old.
Wan Mingjian, chief executive of TCL Mobile Communications, said the joint venture should "help us to quickly achieve our objective to become one of the leading global mobile handset manufacturers."
"We can clearly perceive that Chinese companies are striving for international recognition through brands building, and acquire the market those brands held," said John Gay, an accountant with KPMG.
Earlier last year, the country's zinc and copper producer China Minmetals negotiated on a potential 5.5 billion dollar takeover of Noranda, Canada's biggest mining company, proving that China's resource industry has also begun going global.
In fact, the group of mergers were backed by government's support.
The State Development and Reform Commission (SDRC) and the Export-Import Bank of China jointly issued a circular on November 2 on establishing special loans to facilitate investment overseas. The Ex-Im Bank will earmark part of its annual export credit scheme for the special loans.
By granting the preferential policies, the circular said, companies will undertake mergers and acquisitions more easily in a bid to sharpen their international competitive edge and explore international markets.
"Chinese companies must take great risks while setting foot on the international market, such as risks in politics, management, and fluctuated interest rates," said Huang Hanquan, an official with the SDRC.
The Sichuan Changhong Electric Appliance Co., China's largest television-maker, recently reported that it is expecting a "huge" loss for the year 2004 after writing off debts owed by its crisis-ridden US distributor, Apex Digital Inc. The company's trouble serves as a vivid example of risks domestic companies face.
"Ten years ago, Lenovo's participation in international market is just like taking part in the Paralympics, with various tariffs and other obstacles preventing its internationalization process," said Liu Chuanzhi, former Lenovo's chairman, "Things have changed, however, now we are on a racetrack of real Olympic Games."
(Xinhua News Agency January 1, 2005)
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