'Big chances' for China firms amid global changes

The continuous transformation of the global economy and the rapid development of the domestic economy are giving Chinese companies huge opportunities to expand overseas, business leaders and policymakers said at a forum on Wednesday.

Even so, they said such companies can remain strong competitors and successful in the long term by pursuing both intelligent strategies and innovative business plans.

The global economy is now undergoing profound adjustments. With China and other emerging economies becoming the biggest growth engines in the world, the acceleration of the "going out" strategy is becoming an inevitable trend in China's economic development, Li Haifeng, head of the Overseas Chinese Affairs Office of the State Council, said during the second China Overseas Investment Summit, which was held in Hong Kong on Wednesday.

His remarks referred to the Chinese government's policy of encouraging businesses to expand overseas.

Over the past decade, China's outbound investment has increased by 25 percent annually, outpacing the 6 percent increase seen among traditional investors from developed economies. The momentum of current Chinese overseas investment is unprecedented; outbound direct investment increased by 21.7 percent to $68.81 billion in 2011 - equivalent to 2.3 times the country's total ODI during its 10th Five-Year Plan (2001-05) period.

The current global economy could offer greater investment opportunities to Chinese companies as the effects of the financial crisis become fully realized, participants at the forum said.

As many countries commit to reindustrialization and developing their real economies - or the part of their economies related to actual goods and services - Chinese companies are likely to see more merger and acquisition opportunities at relatively low prices, said Huang Mengfu, vice-chairman of the Chinese People's Political Consultative Conference National Committee.

The achievements have been great so far and the opportunities rich, but the difficulties ahead remain formidable.

Although Chinese enterprises have progressed greatly in making outbound investments over the years, such activities are at a preliminary stage and have put too great an emphasis on the size of businesses and the speed at which businesses expand.

They have also failed to establish a strong industrial chain, Wang Zhongyu, vice-chairman of the CPPCC National Committee, said at the forum.

"A majority of our companies that are 'going out' lack the ability to control risks and formulate global resource strategies to achieve an optimal allocation of resources and maximize their benefits," said Wang. "A scientific formulation and an effective pursuit of investment strategies that cater to our real needs are the biggest issues that need to be dealt."

Wang said Chinese companies to adopt more innovative plans for their overseas investments. In addition to setting up sales outlets and assembly lines overseas, companies should consider undertaking other business deals such as mergers and acquisitions, equity swaps and brand promotion.

As for investment, Chinese enterprises should concentrate on high-tech and high value-added industries ranging from the resource exploration to the processing and manufacturing industries, Wang added.

Supachai Panitchpakdi, secretary-general of the United Nations Conference on Trade and Development, also advised Chinese companies to sustain their expansions by finding a wise strategy to promote overseas investment. He said Chinese companies should take their corporate social responsibilities seriously overseas.

"I would urge Chinese business leaders to avoid mistakes made in the past by some multinationals," he said. "Environmental damage and social conflicts can, and will, hamper the global operations of that company."

The mainland's "going out" strategy will also benefit Hong Kong in a very direct way. In the past, 65 percent of the mainland's ODI has been either put into the city or conducted through the city, according to Ministry of Commerce.

"As an important strategy site for the mainland's 'going out', Hong Kong is experiencing a wonderful change in its role and is enjoying continuous prosperity and stability," said Chan King-wai, chairman of the Hong Kong China Chamber of Commerce.

Unlike in the past, when Hong Kong mainly regarded the mainland as a place to invest in, the city has become a place where mainland enterprises look for business opportunities, a tendency that will prove irreversible in the future, Chan said.

Since the mainland's reform and opening-up, Hong Kong - taking advantage of its leading financial, trade and professional services - has been providing support in the forms of capital, technology, experience and international contacts to help accelerate its development and modernization, said Hong Kong Chief Executive Leung Chun-ying.

litao@chinadailyhk.com