Investment firm targets top-end luxury

ChinaEquity's model is to match up Chinese and Western businesses

The head of one of China's top investment firms says he has seen a surge in investment activity by local companies in Europe, especially targeted at the luxury brand and technology sectors.

John Liu, partner and managing director of ChinaEquity Group, says his firm's business model is to match up Chinese and Western businesses, and become an equity stakeholder in the investments it makes.

In the process, he says, ChinaEquity helps the resultant venture "to grow and succeed" in both markets.

One of its most high-profile deals so far came in 2012, when it joined forces with other co-investors including Italian private equity group Investindustrial in a 37.5 percent stake, worth 150 million pounds ($254.5 million), in the iconic British carmaker Aston Martin.

ChinaEquity is also the founder of the China Team, the first Chinese national sailing team to race in the America's Cup, and a major investor in the China Grand Rally, the country's longest rally which involved 50 racing teams and more than a hundred cars last year.

Liu says there is growing hunger for top-end investments in Europe by Chinese investors, "because what Europe has, can be brought to China to satisfy China's increasing consumption demands".

He adds the move to Europe marks a fundamental shift in investment direction over the past decade and half.

When ChinaEquity was founded in 1999, it mainly helped European investors inject capital into Chinese opportunities - but that trend has now gone into reverse.

"We now do a lot more financial investment into Europe jointly with Chinese companies which want to establish a global reach, or bring European brands and products to China," says Liu.

Its commitment to Aston - the blue-ribbon British sportscar marque founded in 1913, which is famed for its star performances in James Bond movies - is to successfully take on the large and growing Chinese luxury car market, he adds.

Aston has had poor sales in China due to a poor marketing strategy, Liu says.

But what ChinaEquity also really values about Aston is its huge potential to sell branded products like clothes, leather goods, glasses and other lifestyle products.

"We are very optimistic about those products' potential in the Chinese market."

With a strong record of managing high-end luxury product investments and more than 400 points of sale established across the country, Liu reveals ChinaEquity is now in late stage discussions with a major fashion company to develop Aston branded goods in China.

He says the Aston deal is a great example of his team's strategy of investing increasingly in European opportunities, often with Chinese businesses, to help quality European names expand into China.

His team finds its targets by exhaustive networking at investment events and forums around the world, meeting European businesses, and building up trust with them.

Liu says the Europe lifestyle brand market is bursting with opportunity, particularly in Britain, France and Italy, as is the high tech sector in Belgium, Germany, and in Britain.

"European businesses are often not as proactive as they could be, in expanding into emerging markets.

"Historically, they have considered that their local markets and others in Europe combined are enough to support their growth."

But he says that is been far too blinkered, and is now backfiring for many Europeans following the economic decline of many markets across the continent.

"However, their growth can still be sustained if these companies target Europe and Asia together."

A good example of this has been seen in the burgeoning social media industry, where US platforms like Linkedin are successfully globalizing, while European equivalents like Germany's Xing and France's Viadeo, are still restricted to their own domestic markets.

"If those platforms could be spread across Europe and Asia, they could have great potential to grow, or even become listed on major stock exchanges," Liu says.

As one of China's earliest private equity investment firms, ChinaEquity has become one of the country's most successful.

It started its overseas fund management business in 2000 with the launch of a US dollar fund, which had early partners including famous European family-owned brands Porsche and Adidas.

In 2006, it initiated the Origo Fund, a Beijing-based private equity investment fund listed on the London Stock Exchange, which is focused exclusively on growth opportunities created by the urbanization and industrialization of China.

Its top 10 limited partners include investment giants Morgan Stanley and Goldman Sachs.

In 2009 it launched its first renminbi fund, and by the end of last year, it was managing four PE funds and three venture capital funds, worth 3 billion yuan ($481 million, 346 million euros).

Contact the writers through cecily.liu@chinadaily.com.cn

(China Daily European Weekly 06/20/2014 page21)