The Chinese Are Coming! Chinese Overseas Investment and the Expat Manager

Chinese brands sometimes seem to be moving backwards on the international stage, but Chinese outbound investment is finally gathering critical mass. International managers in China are making a grave error if they think that this has nothing to do with them.

There are two types kinds of outward investment, and they mean different things to international managers with China experience.

State or policy-driven  investment is almost entirely concerned with natural resources. This category of outward investment is either undertaken by SOEs or driven by policy-oriented large corporations with strong government ties. State directed overseas investment is often highly political in the target economy, and unfortunately the Chinese tend to ruffle feathers and attract all the wrong attention. Whether building roads in Africa or oil service firms in the US, Chinese policy investment sets off alarm bells.

For most expat managers in China, the opportunities are somewhat limited. Public relations people may have some potential, and law firms could also benefit. In general, however, old-school SOEs are bad clients for service providers. Things are changing, however, and companies like Huawei and CNOOC are making a conscious effort to raise their game.

The other side of the coin is the burgeoning Chinese middle class, who seem to be moving wealth out of China at an increasing rate. The investment of choice right now is real estate, but that is likely to expand into other areas. Another big spend for mainlanders of means is education. The Chinese diaspora is facing many of the same problems that Westerners encountered when they arrived in China 10 years ago. They simply don’t know how things work or how to get things done. Will the Shanghaiese flock to their overseas network? Yes – if they have to. Chinese entrepreneurs tend to see other Chinese as their biggest competitors, and Westerners as somewhat more manageable. True or not, expat managers should be mobilizing their home-town networks.

 

Chinese State or Policy Driven Overseas Investment — Recent Headlines:

Anxiety in New Zealand as Chinese Buy Dairy Farms
By NICK PERRY Associated Press
WELLINGTON, New Zealand January 27, 2012 (AP)
Chinese investors are buying New Zealand farmland for the first time as economic ties with the Asian powerhouse grow ever deeper, sparking considerable anxiety in a country where livelihoods are heavily reliant on agriculture.

China decries US ‘obstruction’ in Huawei bid
(Agencies/Xinhua) Updated: 2011-02-22 10:01
BEIJING – Beijing charged Washington with blocking Chinese investment in US companies after telecom gear maker Huawei dropped buying assets from server technology provider 3Leaf.
The ministry of commerce said “the US side has used all kinds of excuses, including national security, to engage in obstruction and interference in the trade and investment activities of Chinese businesses in the US.”

Obama’s Keystone Denial Prompts Canada to Look to China Sales
Bloomberg By Theophilos Argitis and Jeremy Van Loon – Jan 20, 2012 2:14 AM GMT+0700
President Barack Obama’s decision yesterday to reject a permit for TransCanada Corp.’s Keystone XL oil pipeline may prompt Canada to turn to China for oil exports.

Africans are asking whether China is making their lunch or eating it
The Economist Apr 20th 2011 | NAIROBI
Once feted as saviours in much of Africa, Chinese have come to be viewed with mixed feelings—especially in smaller countries where China’s weight is felt all the more. To blame, in part, are poor business practices imported alongside goods and services.

 

Individual Chinese Investor Headlines:

Chinese investors target property in Canada
With China’s housing market starting to cool down, many Chinese investors have shifted their focus from the domestic property market to Canada, where property represents a better investment.
Chinese investors home in on American properties
China.org.cn November 24, 2011
Fifty percent of Chinese investment in the U.S. has gone to the country’s real estate sector during the last decade, China Business News quoted Feng Lun, chairman of Beijing Vantone Real Estate Co. Ltd. as saying.
U.S. senators proposed a bill late last month which seeks to tempt foreigners into buying houses with the promise of residence visas.

Why Are the Chinese Buying Record Quantities of Gold?
Forbes, 1/29/2012  By Gordon Chang
A better explanation for the gold-buying binge of Chinese citizens is that they are using the shiny commodity as an inflation hedge, as the Financial Timesr ecently suggested.  Yet the buying of gold has increased while inflation has eased.  And that means there must be another explanation.  The best explanation is that individuals in China are using gold as a substitute for capital flight.

 

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