Chinese companies set eye on wild wild west

The guardian

London, July 24:

The Chinese have come up against the reality of doing business in the west — and so far proved themselves enthusiastic exponents of global capitalism. Their bona fides were enhanced last week by the long-awaited revaluation of the currency but in several other situations they also showed that they have mastered the intricacies of the business world.

Haier, the country’s leading white goods manufacturer, decided against blowing its millions in a bidding war for US Hoover owner Maytag; CNOOC, the state oil company, is still playing a canny game in the auction for California’s Unocal; and yesterday saw two of the country’s biggest industrial centres, Shanghai and Nanjing, vying head to head for MG Rover, Britain’s bankrupt carmaker. They are learning quickly to adapt to the ways of the west. Differing political climates undoubtedly make things more difficult for the Chinese, at least in the US.

While the British government sent delegations to plead with the Chinese to rescue Rover, the Americans are determined that none

of their assets should fall into Chinese hands — so much so that the Bush administration has ordered a review of its Chinese trade policy in response to vociferous opposition to CNOOC’s bid for Chevron. That is despite the fact that, unlike Chevron, it has promised to keep on all Unocal’s employees; the two companies already have a joint venture and the majority of Unocal’s assets are in Asia — belying the critics who accuse the Chinese of stealing America’s oil. Political opponents have made much of the fact that CNOOC’s parent is 70 per cent owned by the state, which is supplying extremely cheap finance for the deal — although it would then be refinanced at commercial rates. “It clearly creates a perception of unfair bidding advantage if the company is perceived to be receiving free money from it backers,” said one investment banker. Andrew Huntley of Business Development Asia, an associate of Close Brotherssaid, “State-owned enterprises always get preferential financing, if they want a big acquisition overseas. There is no shortage of dollars in China.”

That makes it all the more surprising that difficulties with financing were being blamed for

delays in the two Chinese bids for MG Rover. Such problems may have more to do with their respective partners than the Chinese themselves. And anyway the Chinese soon came up with the cash. They have also been enthusiastic followers of financial advice, of which there is no shortage on the big deals. Goldman Sachs, which is advising CNOOC and worked with Lenovo, China’s biggest PC manufacturer, on its acquisition of IBM’s PC business, and has moved all its investment banking team from Hong Kong to Beijing. Further down the pecking order, however, Chinese companies often try to do the deals themselves. “Their culture is not to use professional advisers,” said Huntley, “If they did, it could help them to do better.” Chinese companies will want to send teams of people to a target company and spend a week getting to know all its operations, people and products and will then take a month to decide whether or not to get involved. Outside resources, the motivation is different. China is growing

rapidly, but its big firms face the same pressure as western ones: large market shares, fierce competition and thus limited opportunities for domestic expansion.

Brand China

LONDON: London has been in the news, for good and bad reasons, but we should not forget that the next Olympic city is Beijing. Nor should we forget that the Olympics offers the most extraordinary branding opportunity. Simon Anholt, whose book Brand America created a stir last year, says, “Places have always been brands, in the truest sense of the word.” Significantly, he is working on a new book, Brand China. Today China, as a brand, is in a very similar position to ‘brand Japan’ 40 years ago. Then Japan was known for cheap goods.

With the rise of Sony, Toyota, Toshiba and the rest, Japan is now a brand, captured inside each of those company brands, that ensures quality and seems to promise innovation. — The Guardian