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Chinese Firms Eye on Global Impact

These Chinese companies are not yet in the pantheon of globally known names like Sony, DaimlerChrysler or Citigroup, but China Inc. is fast raising its international profile with a corporate buying spree, spending billions on companies and resources to feed its growing industrial juggernaut.


Metals trader China Minmetals Corp. is leading a bid by a consortium of major Chinese State companies for Canada’s biggest mining company, Noranda Inc. The five-member consortium also includes Baoshan Iron & Steel, also known as Baosteel, Citic Investment Corp., Jiangxi Copper and Taiyuan Iron & Steel.


Such deals have the Chinese Government’s blessing: After decades of struggling to prevent Chinese companies from spending precious money overseas, the government is pushing them to invest abroad.


“The story now is not the flow of foreign investment into China, but the flow of Chinese investment overseas, and its impact on other countries,” said Bob Broadfoot, a Hong Kong-based business consultant.


The Noranda purchase would be China’s biggest foreign acquisition so far, worth up to US$5 billion. The biggest U.S. deal to date was State-owned China Netcom’s US$1 billion acquisition of Asia Global Crossing, a subsidiary of U.S. telecom giant Global Crossing.


Chinese companies have made other high-profile acquisitions.


Earlier this year, the leading rivals in a high-profile battle for control of South Korea’s No. 4 automaker, Ssangyong Motor Co., were both Chinese. Shanghai Automotive Industrial Corp. won, beating China National Bluestar Corp., a petrochemicals company.


China’s largest drug manufacturer, Sanjiu Enterprise Group, bought a majority stake in Japanese pharmaceutical maker Toa Seiyaku Inc.


Electronics maker TCL Corp. bought Schneider Electronics GmbH, one of Germany’s few remaining television makers. TCL has since merged with France’s Thomson SA, which owns the American television brand RCA.


Foreign acquisitions of U.S. household brand names like RCA have become commonplace in this age of globalization. So China’s purchases of building blocks for its own industrial empires are drawing less attention than the multinational shopping sprees of Japanese companies a decade ago.


Unlike Sony’s purchase of Columbia Pictures or Mitsubishi’s takeover of Rockefeller Center, China’s deals have been low-profile and focused on less glamorous but more vital resources: oil, gas, minerals, timber, even fish. More than 2,200 Chinese-owned fishing vessels ply the world’s oceans.


Other big State companies like China National Petroleum Corp., parent of PetroChina Co. and China National Offshore Oil Corp., or CNOOC, are buying into Indonesian oil and gas fields. Through the end of 2003, China had invested more than US$6 billion in 58 overseas oil and gas projects, the People’s Daily reported. Overseas investments in mineral ventures totaled US$1 billion.


Overall, Chinese companies had invested US$33 billion in 7,470 companies in more than 160 countries and territories by the end of 2003, according to the Ministry of Commerce. In 2003 alone, direct overseas investment by manufacturers and other non-financial companies totaled US$2.8 billion. That figure is dwarfed by foreign investment in China, expected to hit a record US$60 billion this year.


Although the Chinese Government is openly encouraging companies to “go global,” it is only indirectly involved in such deals. The State holds controlling stakes in many companies, but Party officials no longer fill management posts.


The Minmetals deal reportedly has financial backing from the State-owned China Development Bank. But in many cases, deals are self-financed. Big companies like PetroChina and CNOOC have raised huge war chests with overseas share offerings.


(Shenzhen Daily December 6, 2004)


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