Government encourages enterprises to expand overseas
Chinese enterprises are encouraged to be bold in acquiring stakes in overseas enterprises especially in the energy and resources sectors.
In order to encourage overseas mergers and acquisitions (M&As), especially in sectors of strategic importance, the government is going to use its $2-trillion foreign exchange reserves, said Zheng Xinli, vice-director of the Policy Research Office of the CPC Central Committee.
As an advisor to the highest leadership, Zheng’s suggestions are very likely to become central government policy.
As the financial crisis has resulted in mounting difficulties and shrinking asset values for some enterprises in developed countries, now it is a good opportunity for Chinese enterprises to expand overseas.
For one part, the government should take the opportunity to remove the long-existing energy and resource “development bottleneck”; for another part, the government should encourage both State and private enterprises (to invest overseas) and, especially, be active in energy and resource exploration and development.
Lin Yueqin, economist at the Chinese Academy f Social Sciences, said, the government should prepare more detailed investment guidelines which “identify investment in which sectors and countries is attractive and profitable. As the private investors are not familiar with the global economic geography, this is extremely important for them.
With the goal of fostering 30-50 State-owned enterprises (SOEs) to become competitive multinationals by 2010, the government unveiled a strategy encouraging enterprises to “go out” at the turn of the century after experiencing decades of painstaking efforts in attracting foreign investment.
But this time, Zheng’s message is clear that China will possibly encourage enterprises to invest overseas, said Lin, that’s good news for the private sector.
In Zheng’s opinion, the government should offer preferential loans for investors to improve the infrastructure in destination countries. At a forum in Beijing last Friday, Wang Xiaoqi, head of planning and development at the State-owned Assets Supervision and Administration Commission, said that the national SOE caretaker had already picked 10 major players to gain opportunities overseas.
In his opinion, not only should the M&As require careful planning, but also we should avoid vicious competition among Chinese bidders.
$45 billion this year, up from last year’s $26.5 billion, is expected to reach from direct investment overseas this year.
Lu Jinyong, a professor in overseas investment at University of International Business and Economics in Beijing, expressed his opinion as follows.
Gradually China is becoming a capital exporter. Given the opportunity to catch the tide next year, by 2010, Chinese enterprises’ overseas direct investment might reach $70-80 billion, roughly the same as the inflow of foreign direct investment in 2007.
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