The Hidden Risks in China’s Leapfrog Overseas Acquisitions
By LIU QIONG
 |
|
Many of the Chinese enterprises that are rapidly expanding their businesses abroad have either scant or nil experience in global business management. Photos by CFP |
IT reads like a love story. “After 18 years of unrequited love, we’re finally together, having formed a union in only half a month of courtship,” said Xiang Wenbo.
But Xiang is no Romeo. He’s a businessman, and he made the above quote in his capacity as president of China’s SANY Heavy Industry. Xiang waxed lyrical with regards to the group’s successful acquisition of Germany-based Putzmeister, a leading global concrete machinery manufacturer, last April. “You could say I’ve been longing for her [Putzmeister] for 18 years,” he said.
Hot on the heels of SANY’s global wheeling and dealing, in May 2012, Dalian Wanda Group officially announced its purchase of AMC Entertainment Inc., the world’s second largest movie theater chain, for US $2.6 billion. Wanda also indicated that it would immediately invest at least US $500 million to sure up the chain’s operations.
As a matter of fact, in the first half of this year, large global acquisitions were not rare for Chinese companies operating overseas. Data from the Ministry of Commerce indicated the volume of China’s non-financial overseas direct investment reached US $35.4 billion in the first half of the year, representing a year-on-year increase of 48.2 percent. Transnational acquisitions accounted for one third of the total investment volume.
Despite the buoyancy of Chinese enterprises’ global acquisitions, navigating the global economy remains a tricky task for Chinese enterprises overseas. The challenge has been particularly pronounced since the global financial crisis.
Another issue facing the country’s leading businesses abroad is a lack of experience in international corporate management. A recent survey indicated that the failure rate of Chinese corporations’ overseas investment is around 67 percent, while the international average stands at roughly 50 percent.
