Crisis good opportunity for Chinese companies to go global

BEIJING, April 12 -- Guo Min, a director in charge of the overseas acquisition business of a Guangdong-based private company, said he became extremely busy over the last one year as the financial crisis gave a good opportunity for Chinese companies to go global.

Guo expects the strenuous pace of life to continue, due to the robust momentum of mergers and acquisitions that Chinese companies are expected to be involved in over the next three years.

The financial crisis has given Chinese companies a shortcut for making more acquisitions overseas, as the latest high-profile deal between Chinese automaker Geely and global giant Ford shows.

There would have been little chance for both sides to reach the $1.8-billion deal without help from the financial crisis, said Long Yongtu, secretary-general for the Boao Forum for Asia (BFA).

"The end of 2008 and the beginning of 2009 was a challenging period in terms of raising new short-term or long-term funds for the automotive sector," Par Ostberg, an executive of the Swedish Volvo Group, said.

And, opportunities continue to pour in as some overseas companies have yet to get out of the tight credit situation in a weak global economic recovery.

In addition to the economic scenario, China's commercial banks started providing the country's first batch of annexation loans to domestic companies for acquisition projects from last January.

Entrepreneurs said the annexation loans also drive forward the fever for mergers and acquisitions, both inside China and abroad.

China's foreign investment exceeded $9.4 billion in 2009, up 54 percent year on year in 2009, according to the Ministry of Commerce.

Chinese firms are going global in various industries such as automotive, steel, metals, energy and computers to explore new markets and acquire raw material and energy resources.

China's mining and metal industry mergers reached $16.1 billion in 2009, accounting for 27 percent of the total volume of business in the world, according to the latest report by Ernst and Young.

Overseas mining and metal acquisitions will continue growing in 2010 and underdeveloped areas such as Africa, Asia and South Africa will be the new focus for investment. Rare metals will attract more investment, it said.

But the Chinese companies, which have yet to become competitive global players, are facing a host of strategic, operational and culture hurdles in overseas acquisitions.

The overseas investment environment experienced deterioration and rising protectionism since the financial crisis, as nations started to protect their own industries.

"As the factory of the world, Chinese companies have served other countries with its products, along with its resources and energies," said Xiong Weiping, the president of Aluminum Corporation of China (Chinalco) at the forum. "But China itself is facing scarcity of energy and resources," Xiong said.