Straits Times China Correspondent: According to private equity fund A Capital – Chinese firms to look outward and spend US$600 billion (S$741 billion) to assimilate resources and assets from abroad to help restructure the Chinese economy.
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Chinese firms’ S$741b war chest
That’s the amount they’re likely to invest overseas in next 3 years, says report
By Grace Ng, China Correspondent, In Beijing
Source – Straits Times, published April 17, 2013
CHINESE firms are set to spend some US$600 billion (S$741 billion) over the next three years to buy overseas resources and assets offering them the brands and technology to become powerhouses in China’s restructuring economy, a new report has predicted.
And Europe, where Chinese investments grew an impressive 21 per cent last year, will likely continue to be a top destination, private equity fund A Capital said in a report released yesterday.
The fund’s cornerstone investors are China’s sovereign wealth fund, China Investment Corp, and Belgium’s Federal Holding and Investment Company.
“At a time when people complain about Europe’s de-industrialisation, the Chinese believe more in the European industry than Europeans themselves,” said Mr Andre Loesekrug-Pietri, founder and managing partner of A Capital.
Europe received US$12.6 billion, or one-third of total Chinese outbound direct investments (ODI), last year. Its growth far outstripped the 14 per cent rise in China’s global ODI, which hit US$77.2 billion last year. The No. 2 destination was North America, which saw high-profile deals such as the Dalian Wanda Group’s US$2.6 billion purchase of movie theatre operator AMC, followed by resource-rich South America.
Chinese firms took advantage of attractive valuations and lower regulatory barriers in Europe to close deals such as Bright Food’s purchase of 60 per cent of British cereals brand Weetabix and state-owned diesel engine maker Weichai Power’s stakes in two German equipment firms.
European assets are attractive because they provide the skills and know-how to help Chinese firms rise up the value chain and position themselves for China’s next phase of development, which will be driven partly by a massive urban growth spurt.
“These are precisely areas of strength in Europe,” said Mr Loesekrug-Pietri, citing sectors such as energy, environment and transport, particularly cars.
Europe is also strong in consumer goods and brands as well as services that improve the quality of life, sectors of increasing interest to China’s 1.3 billion consumers.
In contrast, Asia did not fare as well last year. A Capital’s data showed a 65 per cent drop in Chinese mergers and acquisitions in Asia, mainly due to fewer deals in Singapore and Hong Kong.
But South-east Asian economies’ rich commodities and market access still make them attractive. China’s non-financial ODI, which included resources deals, in Asean actually rose 52 per cent last year, according to commerce ministry data in January this year.
Chinese players such as property and logistics conglomerate Qingjian Group are keen to expand further in Asean, using Singapore as a springboard.
“We are looking at opportunities to increase resources and real estate projects. Some markets that are attractive include Malaysia – where there is the Iskandar Development Region – and Indonesia, which has resources,” said Mr Zuo Haibin, Qingjian Group’s chairman and general manager.
He was speaking at a Beijing press conference held by Singapore’s United Overseas Bank yesterday. The bank has just set up an advisory unit to help Chinese state-owned and private enterprises expand their business in South-east Asia and tap cross-border investment opportunities.