Wandering China

An East/West pulse of China's fourth rise from down under.

China’s state giants continue global push [Straits Times]


How times are a’changin. For millennia the Chinese dynasties built great walls to hole themselves in and today Beijing heralds in a state-aided global push. Question is – is the world ready for household Chinese names to permeate their lives? Made in China or constructed by Chinese is one thing, but ‘Created by China’ is quite another.

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China’s state giants continue global push
By Grace Ng, China Correspondent
Source – Straits Times, published February 23, 2011

Photo - ST

‘They have achieved good economic benefits,’ Mr Shao Ning, vice-chairman of the State-owned Assets Supervision and Administration Commission, told a news conference.

The central state-owned enterprises’ (SOEs) overseas profits made up 37 per cent of their earnings, he added.

It is not a small sum. Profits jumped 10 per cent to 994.5 billion yuan (S$190 billion) in 2009, and skyrocketed to reach about two trillion yuan last year.

The global push comes as Beijing seeks to nurture what it refers to as ‘national champions’ that will become global brand names such as Sony or Samsung in the next five years.

And SOEs, bankrolled by the Chinese government, are likely to lead this push. After all, they already make up the majority of the 30-odd Chinese firms on the Fortune 500 list.

‘SOEs have always got priority in subsidies and help to expand at home. So it’s likely that the central government will also give them more financing to gain global dominance in the next five years,’ said Mr Peter Zhang, researcher at independent think-tank Beijing Enterprises Association.

One indication that Beijing will pour big bucks into the ‘Go Abroad’ policy is state-owned China Development Bank’s aim to disburse US$500 billion (S$640 billion) of overseas loans over the next five years.

It is designated as the ‘go-to’ bank to support Chinese forays abroad, and SOEs are its key customers.

Mr Shao stressed that overseas assets of the SOEs will continue to increase, praising these companies for ‘making fairly big strides globally’.

But even with so much support, the SOEs will have to tread more carefully as they venture abroad.

‘The spike in Chinese enterprises’ investing sprees abroad has inspired both awe and alarm in recipient countries,’ Mr Zhang said.

China’s outbound investment hit US$56.5 billion in 2009, up from a mere US$2.8 billion in 2003, official data released in November last year showed.

Some have hailed Chinese companies as economic saviours for contributing US$10.6 billion of tax revenues and creating 438,000 jobs outside China in 2009.

But others fear that Beijing may have a hidden agenda in controlling prized assets in sectors linked to national security such as oil, military equipment and advanced technology.

Indeed, of the failed deals worth more than US$300 million that Chinese enterprises have encountered in the past five years, about 74 per cent were due to barriers from local regulations and unfavourable market environments, the Chinese commerce ministry said late last year.

It added that after acquiring the assets, the Chinese managers, who lacked overseas experience, often found it just too tough to handle the mergers.

Mr Shao acknowledged that the SOEs’ lack of talent with cross-border expertise hampered their overseas forays.

‘Executives are mostly unfamiliar with the legal and business environment,’ he said. ‘We will attach greater importance to nurturing their international capacity…(and) competitiveness.’

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Ups and downs

Doing well

  • China Ocean Shipping Group (Cosco): The country’s largest shipping and logistics enterprise, which has a unit listed in Singapore, has been making waves overseas by inking massive deals to build new ports and grow its global market share. A recent €4.3 billion (S$7.5 billion) deal was to manage Piraeus, the largest container port in Greece, for 35 years.
  • China National Offshore Oil Corp (CNOOC): China’s largest offshore oil and gas producer last year paid US$8.4 billion (S$10.7 billion) for energy assets in Latin America, the United States and Africa, and has 15 new oil and gas projects under construction. Besides its multibillion-dollar quests to control key oil provinces like Uganda and Nigeria, CNOOC is also embarking on potentially sensitive deep-water exploration projects in the South China Sea.Not doing well
  • China Mobile: After years of declaring that it would make telco acquisitions in developing markets across Africa and Asia, China’s largest telco has little to show for it. It is faced with its slowest revenue growth in 13 years as a listed company, and is making little headway in its effort to push for global adoption of a China- developed 4G mobile system.
  • China Railway Construction Corp: It made headlines recently for building a US$1.8 billion ultra-modern railway in Saudi Arabia to carry up to 72,000 people an hour to Mecca during the Haj pilgrimage. But it racked up losses of US$600 million – the biggest by any Chinese company in an overseas venture so far.
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    graceng@sph.com.sg

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    Filed under: Beijing Consensus, Chinese Model, Communications, Domestic Growth, Economics, Influence, International Relations, Media, Nationalism, Politics, Public Diplomacy, Reform, Soft Power, Straits Times, The Chinese Identity, The construction of Chinese and Non-Chinese identities

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