Crisis dampens zeal to go global

Special Report:Global Financial Crisis

BEIJING, April 23 -- The world financial crisis has severely dampened
Chinese companies' enthusiasm for investing overseas, although many of them said
they still want to go global, results of a survey showed Wednesday.

About 85 percent of respondents said their overseas business has been
hampered by the crisis, and as a result, merely 7 percent said they would like
to add to their outflows this year.

However, when asked whether they will expand overseas investment in the
next two years, 40 percent answered yes.

The report, released by the China Council for the Promotion of
International Trade (CCPIT) and the third of its kind, is based on a four-month
survey of 1,100 companies in sectors ranging from textiles, hi-tech and
construction to resources.

Companies that are waiting for overseas opportunities see investment as
part of a long-term strategy to improve profit margins and build their brands on
the international stage, according to the report.

The findings do not appear to tally with recent high-profile merger and
acquisition (MA) activity involving Chinese enterprises, which many experts
believe heralded a fresh burst of overseas investment.

In January and February, more than 20 overseas MA deals worth 20
billion U.S. dollars were reportedly inked by Chinese companies, involving many
big players.

In February alone, Shenzhen Zhongjin Lingnan Nonfemet, China's fifth
largest zinc producer by output, acquired 50.1 percent of Perilya, an Australian
zinc and lead mining company. In the same month, Chinalco announced plans to
inject 19.5 billion U.S. dollars into Rio Tinto, one of the largest mining
corporations worldwide.

But Su Chang, macro-economic analyst at China Economic Business Monitor,
told China Daily that such cases do not reflect the whole picture. "They are
limited to resource-oriented sectors," he said.

According to the report, more than half the companies establish an overseas
presence through sales offices, compared with only 8 percent through MAs,
and "the general situation will not change in three to five years".

Su forecast that investment will pick up only after the global economy
takes a turn for the better in the last quarter of this year.

A recent report by PricewaterhouseCoopers agreed, saying Chinese companies'
overseas investment will rebound when the global economy comes out of recession.

Besides the dire economic situation, the fear of trade protectionism and
limited funding channels are also obstacles.

"There has been a slowdown in growth of overseas investment because the
biggest concerns are a deteriorated investment environment and difficulty in
fund-raising," Sun Yanbin, vice-chairman of CCPIT Hubei branch, told China
Daily.

The CCPIT report also shows the major challenges Chinese companies
encounter are worries about quality and safety of products.

This year, the government has rolled out policies to stimulate overseas
investment but the companies surveyed reflected only a low level of satisfaction
with credit insurance and foreign exchange facilities.

"We are trying to simplify the procedures and revise credit insurance
rules," said Sun Lujun, deputy director of the State Administration of Foreign
Exchange.

From 2002 to 2007, overseas investment grew 60 percent annually. By 2008,
the cumulative investment was worth 130 billion U.S. dollars with non-financial
overseas investment surging 64 percent to 40.6 billion U.S. dollars that year.

(Source: China Daily)