In the Hutong
Catching up on my reading (I’m waaay behind, but for all the good reasons – work, family, exercise, etc.), I came across a superb op-ed in The New York Times by columnist Philip Bowring explaining why China’s overseas acquisition strategy was not going to grow as quickly as some may have thought:
It will grow as trade relations deepen and Chinese technology and brand names have global impact. But this will be gradual. After a first flush of cash-driven enthusiasm, Chinese firms are proceeding with greater caution, less likely to throw money at countries and industries with which they have scant experience. They are also meeting increasing obstacles in some countries.
In the case of consumer goods companies in particular, many have discovered that their best bet for rapid growth in the near- to medium-term is right here at home. There are exceptions, of course (consumer electronics and white goods leap to mind), but companies like Lenovo, Geely, Li-Ning, Haier, SAIC, and most of the major local online companies – to name a few obvious examples – are making only tentative, careful steps offshore, preferring instead to focus on growing consumer opportunities at home.
Bowring makes the excellent point that the bargain-buying opportunity for Chinese companies offered by the global slowdown is probably over. The bigger issues, in my opinion, are a) that when the opportunity arose, China’s companies were not ready from either a financial or operational standpoint to make the jump, and b) offshore acquisitions have not yet proven to be an efficient way to grow a Chinese company. PRC corporates looking for access to resources – human and intellectual as well as natural – will continue to acquire them, but it seems increasingly likely that China, Inc. will develop its offshore markets more carefully, organically, and methodically in the future.