With the exception of the Wall Street Journal, the English language press is not giving enough coverage to China’s increasing liberalization of outbound foreign investment. Massive Chinese overseas investment is coming and those ready for it will profit.
For the last year or so, the Chinese government has been increasingly talking about ramping up outbound foreign investment. The government recognizes that few Chinese companies have the skills required to be true global players and that acquiring foreign assets and operating overseas will hasten the learning curve, just as it did for Japanese companies in the 80’s and Korean companies in the 90’s. It also makes for good world politics.
One of our Chinese clients heads the industry council of a mid-sized Chinese city. Around four months ago (just around the time the Chinese government increased the overseas investment limit) the government informed the council that its member companies should be investing overseas and that the government would match their investments. This past week, the Chinese government announced that sometime in 2006 it will end limits on foreign currency purchases by Chinese companies and do even more to encourage investment overseas. This will accelerate the buying binge among cash-rich Chinese companies looking to expand abroad. Many already are familiar with CNOOC’s failed bid earlier this year for Unocal and Lenovo’s purchase of IBM’s PC division, but there are smaller asset purchases and buy-out attempts going on all the time. Just this past week, Onyx Software Corporation, a publicly traded customer management software company in the Seattle suburb of Bellevue, Washington, turned down a buy-out offer from CDC, one of China’s leading enterprise software companies. The Yuan’s value will eventually increase, making foreign assets cheaper for Chinese companies and further accelerating their foreign investments.
Our sources in China tell us to be on the particular lookout for Chinese individuals looking for foreign real estate and Chinese companies looking to expand overseas in electronics, auto parts, software, and heating and air conditioning. Our law firm’s foreign investment lawyers are already seeing and getting some of this work.
We would love to get your perspective regarding these big FDI changes.