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Financial crisis dampens zeal to go global
By Ding Qingfen (China Daily)
Updated: 2009-04-23 07:24

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 on 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.

Financial crisis dampens zeal to go global

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

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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 (M&A) activity involving Chinese enterprises, which many experts believe heralded a fresh burst of overseas investment.

In January and February, more than 20 overseas M&A deals worth $20 billion 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 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 M&As, 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 with non-financial overseas investment surging 64 percent to $40.6 billion that year.

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