Communication 'paves way' for overseas deals

XIAMEN - Chinese companies should strengthen their international communication to facilitate their overseas expansion plans, said a senior official with the Organization for Economic Cooperation and Development (OECD).

Andrea Goldstein, head of global relations with the OECD's Investment Division, said tight financial conditions around the world have created investment opportunities for Chinese companies.

However, he said, better mutual understanding was needed so that acquisition plans by Chinese investors could be understood by overseas companies.

Although many economists say that Chinese overseas investment will have a positive effect on the world economy, Chinese companies' overseas expansion hasn't always gone smoothly. Some countries limit Chinese investors' stakes in certain companies.

"The protection is a reflection of fears about Chinese companies. Anything that can be done to minimize these fears through transparent operation is welcome," said Goldstein.

"Continued dialogue should be in place so people are not afraid of Chinese investors. I do not think there is anything (protection) that is specific for China."

Goldstein noted that the US and Japan ran into the same reactions decades ago.

The scale of China's overseas direct investment has increased dramatically, with companies going abroad to cut costs or lift their global profiles.

Figures from Chinese authorities suggest that the scale of China's overseas direct investments reached some $68.8 billion in 2010, up about 21.7 percent from 2009.

The United Nations Conference on Trade and Development said in a report that China climbed the world rankings to become the fifth-largest outbound direct investor in 2010, and there is huge potential for an even higher ranking.

Goldstein suggested that Chinese companies need more international management teams to handle overseas acquisitions.

"Many acquisitions fail because of managerial problems" and problems integrating new operations, he said. "China is confronting the same problems that Japan had in the 1980s of forming an output-orientated international managerial team." Chinese financial institutions should also provide more funding for overseas acquisitions, and the government could help by providing information and other support to ensure companies make good decisions, he said.