Law sought for overseas investment

Updated: 2013-03-08 07:38

By He Wei (China Daily)

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 Law sought for overseas investment

A woman buys Guangming pure milk at a market in Shanghai. The Bright Food Group has completed four major international buyouts over the past two years. Niu Yixin / For China Daily

Call for chinese govt to help firms expand business, investment and reputation overseas

China should introduce legislation to help overseas investment by Chinese companies, as an increasing number extend their global footprint, a national legislator has said.

Nurturing domestic multinational corporations should be a "national strategy", and the government should provide a one-stop service to facilitate international expansion, says Ge Junjie, vice-president of Bright Food Group Co and a deputy from Shanghai to this year's session of the National People's Congress currently taking place in Beijing.

"An overseas investment law can serve as the legal framework for Chinese companies to enter the world stage, protect overseas assets and ensure sustainable growth," he says.

He also suggests that the country allocate $3 trillion from foreign exchange reserves to bolster international expansion by Chinese companies.

Ge says he believes the establishment of world-class companies in China is lagging behind the overall growth of the domestic economy, putting the country at a disadvantage in international labor division matters, which leads to limited bargaining power at industry-wide talks. He says it is natural for Chinese companies to expand overseas, while the international costs of resources and financing keep dropping and high levels of work efficiency remain in place.

"In the past 30 years, China has been producing for the world. It is time to make the rest of the world produce for China," Ge says.

One way to go global is through mergers and acquisitions. Ge's company, the country's second-largest food company, has completed four major international buyouts in the past two years.

The deals are an example of Bright Food's attempts to cater to China's growing middle class, who seek higher-quality products and Western-style food, and have helped the company boost overseas sales to as much as 30 percent of its total sales in five years.

Law sought for overseas investment

Bright Food, the maker of dairy, sugar and wine products, is in talks with more potential partners for acquisitions, Ge adds.

However, he believes the lack of proper guidance from the government will pose severe challenges to the company's overseas ambitions.

"When we first attempted to acquire Manassen Foods, the Australian food distributor, we had to search from scratch for local tax, financing and investment policies," he says.

To increase the number of China's equivalents of Coca-Cola, McDonald's or Wal-Mart requires not only great financial resources, but also management experienced in international operations, high technology, branding skills and many other attributes, he says. None can be acquired in a short time.

And because many Chinese companies are seeking global operations, Ge suggests that aside from an overseas investment law, the government should set up a public service platform to offer investment policy briefings and guidance about industry trends, as well as measures for risk control.

The move would help address common needs of companies and maximize their global potential, he adds.

Zhang Zhao'an, an economist, says he believes that such a law is essential to determine the course of Chinese firms' overseas expansion.

"With such a law we would build the foundations for Chinese strength and influence, and shape an international strategy capable of overcoming the challenges of going global," Zhang says.

A recent study released by Fortune magazine showed that Chinese companies are struggling to translate their economic might into global reputation.

Not a single Chinese company was ranked in the top 50 in the magazine's annual "World's Most Admired Companies List" for 2013, which is widely considered among the most definitive report cards on global corporate reputation.

While there are plenty of huge Chinese companies with massive profit margins, the country's position remains extremely weak when it comes to producing a superior global brand that consumers seek out, says Fan Yun, chairperson of Shanghai Fushen State Assets Evaluation Co Ltd and a legislator from Shanghai.

Chinese business projects in the United States have run into difficulties in the past two years with Washington blocking the deals of some companies, such as Sany, Huawei and ZTE.

Unconvinced by alleged national security concerns as a reason to turn down Chinese investment, Sany, China's biggest construction machinery manufacturer, has taken legal action against the US government.

The Chinese Ministry of Commerce is closely following the case and conducting its own legal investigation, Commerce Minister Chen Deming said on the sidelines of the 12th National People's Congress this week in Beijing.

In light of the dispute, the US private sector is calling for a consistent political commitment from Washington to smooth the way for direct investment from China, which is projected to hit $400 billion by 2020.

Brenda Foster, president of the American Chamber of Commerce in Shanghai, believes Chinese direct investment has the potential to contribute to a more balanced bilateral commercial relationship and the strengthening of US-China ties.

More importantly, Chinese investment helps create new jobs in a more profound way than official statistics show, says Daniel Rosen, co-founder of research company Rhodium Group.

Rosen says at least 30,000 American people have benefited from new job positions set up by Chinese companies in the country, five times more than records from government agencies state.

"I think that ZTE and Huawei should be allowed to bid for these projects," says Gary Rieschel, founder and managing partner of Qiming Weichuang Venture Capital Management (Shanghai) Co Ltd. "Obviously, it is a mistake to exclude them."

But the cases don't reflect normal Sino-US economic ties, he adds. "At the very senior level of government, as well as business, there has been more collaboration and more engagement than decades ago."

(China Daily 03/08/2013 page17)