This is an excellent article on the growing movement of innovations in China that will be benefit Chinese companies looking to expand internationally.
http://www.mckinseyquarterly.com/A_CEOs_guide_to_innovation_in_China_2919
Showing posts with label China. Show all posts
Showing posts with label China. Show all posts
Thursday, February 2, 2012
Monday, January 16, 2012
Outbound M&A hits record high, says PwC report
By Hu Yuanyuan (January 13, 2012 9:56 PM)
BEIJING - Chinese outbound merger and acquisition (M&A) deals reached a record high of $42.9 billion in 2011, an increase of 12 percent year- on-year, despite the global economic slowdown, according to the accountancy company PricewaterhouseCoopers LLP (PwC) on Friday.
"Those figures indicate that Chinese investors' appetite for deals is stronger than ever, across a wide range of industries and geographical locations," said Leon Qian, PwC China's Transaction Services Partner.
"Despite the global macroeconomic climate, confidence among investors looking for M&A deals both within China and abroad remains surprisingly robust," Qian added.
As China moves into a new phase, M&A is emerging as a key enabler of consolidation, growth, market positioning and the acquisition of strategic assets and expertise.
BEIJING - Chinese outbound merger and acquisition (M&A) deals reached a record high of $42.9 billion in 2011, an increase of 12 percent year- on-year, despite the global economic slowdown, according to the accountancy company PricewaterhouseCoopers LLP (PwC) on Friday.
A total of 207 outbound M&A deals were signed last year, up 10 percent from 2010.
"Those figures indicate that Chinese investors' appetite for deals is stronger than ever, across a wide range of industries and geographical locations," said Leon Qian, PwC China's Transaction Services Partner.
The strong growth in outbound deals also pushed the country's overall M&A activity up by 5 percent to 5,364 deals, the highest-ever annual total. Domestic deals climbed 11 percent to 3,262.
"Despite the global macroeconomic climate, confidence among investors looking for M&A deals both within China and abroad remains surprisingly robust," Qian added.
As China moves into a new phase, M&A is emerging as a key enabler of consolidation, growth, market positioning and the acquisition of strategic assets and expertise.
There were 16 outbound M&A deals valued at more than $1 billion by Chinese buyers last year, compared with 12 in 2010. Fourteen of those deals were in the resources and energy sectors.
"Chinese buyers now attach more attention to M&A opportunities in the industrial-products sectors, reflecting the country's gradual shift to a consumer-driven economy," said Edwin Wong, PwC China's International Tax Services Leader. The sluggish global economy, however, is affecting foreign M&A buyers wanting to make a strategic purchase in China, PwC said in the report.
Economic uncertainties in home markets led to an 11 percent decline in foreign M&A activity in China to 482 deals, falling most notably in the second half of last year after a rebound in 2010.
Meanwhile, private equity (PE) is emerging as a key provider of growth capital for China's small and medium-sized enterprises, as they aim to expand despite challenges in raising funds amid fiscal tightening and uncertainty in the equity markets.
The number of larger PE deals (those exceeding $10 million) increased by 18 percent to 437 transactions in 2011 - the highest number ever, according to the PwC report. Private-equity fundraising also reached a record high in 2011, totaling $44.1 billion for investment in China. Yuan-denominated funds accounted for 60 percent of the total, continuing the trend of the previous two years.
"A key trend is the expansion of the domestic Chinese PE industry; there are now many domestic players who can compare advantageously to their better-known global peers," said Qian.
Friday, January 6, 2012
Chinese Rich seek offshore wealth management
Interesting article that makes a lot of sense as Chinese entrepreneurs look overseas to expand their empires as well as keep some assets overseas as a hedge for the future.
By Cai Xiao
China Daily
BEIJING - Chinese commercial banks should prepare to manage offshore wealth to meet the demands of the rich overseas, according to a report released on Thursday.
The report, carried out by the Boston Consulting Group and China Construction Bank, also said the value of China's individual investable assets will come to 62 trillion yuan ($9.8 trillion) by the end of 2011.
The report was compiled from the results of a survey conducted among more than 2,000 wealthy respondents - technically deemed high-net-worth (HNW) individuals - and from interviews conducted with various private-bank relationship managers.
Of the total amount of individual investable assets, about 27 trillion yuan (44 percent) came from the type of households polled in the survey. There is expected to be about 1.21 million such households this year, an increase of 42 percent over the past three years.
According to the report, 35 percent of wealthy Chinese are in Beijing, Shanghai and Guangdong. Wealth is also spreading rapidly to places such as Shanxi and Hainan provinces, which are rich in natural resources.
Nearly 60 percent of wealthy Chinese are entrepreneurs who made their money by starting their own businesses. Many of them have taken to looking to expand their endeavors abroad.
According to the report, private enterprises contribute about one-third of the total value of China's trade. In the first three quarters of 2011, they generated about $739.4 billion in trade, up about 40 percent from the same period a year earlier.
"As more and more Chinese entrepreneurs expand their businesses abroad, Chinese commercial banks should now start preparing to manage wealth offshore," said Wei Chunqi, general manager at China Construction Bank's wealth management and private banking department.
The report said Chinese commercial banks could test out wealth-management arrangements in Hong Kong, which has well-established legal, accounting, and regulatory systems.
"There are three ways a Chinese commercial bank can set up an offshore wealth-management arrangement: Setting up its own branches overseas, acquiring a financial institution abroad or establishing a joint-venture company with a foreign institution," said Wang Nan, a principal at Boston Consulting Group and a chief author of the report.
Wang said the demand for offshore products increases with wealth.
Of those with more than 50 million yuan in assets, 22 percent have already used offshore products and services. Of those with more than 300 million yuan in assets, about 70 percent expect to see more exposure to offshore products and services in the future.
"Security and privacy were big considerations for me when I was choosing a wealth-management agency," said Xiao Baiyou, at Outlet China Ltd, which develops, operates and invests in outlet malls in China.
Xiao said many wealthy Chinese want to have their wealth managed in Singapore or Northern Europe, both places believed to have good legal, accounting and regulatory systems.
Ji Ran contributed to this story.
China Daily
By Cai Xiao
China Daily
BEIJING - Chinese commercial banks should prepare to manage offshore wealth to meet the demands of the rich overseas, according to a report released on Thursday.
The report, carried out by the Boston Consulting Group and China Construction Bank, also said the value of China's individual investable assets will come to 62 trillion yuan ($9.8 trillion) by the end of 2011.
The report was compiled from the results of a survey conducted among more than 2,000 wealthy respondents - technically deemed high-net-worth (HNW) individuals - and from interviews conducted with various private-bank relationship managers.
Of the total amount of individual investable assets, about 27 trillion yuan (44 percent) came from the type of households polled in the survey. There is expected to be about 1.21 million such households this year, an increase of 42 percent over the past three years.
According to the report, 35 percent of wealthy Chinese are in Beijing, Shanghai and Guangdong. Wealth is also spreading rapidly to places such as Shanxi and Hainan provinces, which are rich in natural resources.
Nearly 60 percent of wealthy Chinese are entrepreneurs who made their money by starting their own businesses. Many of them have taken to looking to expand their endeavors abroad.
According to the report, private enterprises contribute about one-third of the total value of China's trade. In the first three quarters of 2011, they generated about $739.4 billion in trade, up about 40 percent from the same period a year earlier.
"As more and more Chinese entrepreneurs expand their businesses abroad, Chinese commercial banks should now start preparing to manage wealth offshore," said Wei Chunqi, general manager at China Construction Bank's wealth management and private banking department.
The report said Chinese commercial banks could test out wealth-management arrangements in Hong Kong, which has well-established legal, accounting, and regulatory systems.
"There are three ways a Chinese commercial bank can set up an offshore wealth-management arrangement: Setting up its own branches overseas, acquiring a financial institution abroad or establishing a joint-venture company with a foreign institution," said Wang Nan, a principal at Boston Consulting Group and a chief author of the report.
Wang said the demand for offshore products increases with wealth.
Of those with more than 50 million yuan in assets, 22 percent have already used offshore products and services. Of those with more than 300 million yuan in assets, about 70 percent expect to see more exposure to offshore products and services in the future.
"Security and privacy were big considerations for me when I was choosing a wealth-management agency," said Xiao Baiyou, at Outlet China Ltd, which develops, operates and invests in outlet malls in China.
Xiao said many wealthy Chinese want to have their wealth managed in Singapore or Northern Europe, both places believed to have good legal, accounting and regulatory systems.
Ji Ran contributed to this story.
China Daily
Sunday, January 1, 2012
COFCO plans to expand global logistics system
COFCO certainly has the clout and ambition to become a global player against the likes of Cargill and ADM - their farm to fork strategy indicates more than just commodity food staples too.
 A China National Cereals, Oil and Foodstuffs Corp (COFCO) booth at an exposition in Beijing. As China's largest State-owned agricultural company, COFCO is seeking to expand overseas more rapidly. [Photo / China Daily] |
Deals being negotiated and total spending could be substantial
BEIJING - China National Cereals, Oil and Foodstuffs Corp (COFCO), the largest State-owned agricultural conglomerate, has made steady progress in its overseas investment, said Chairman of the Board Frank Ning.
COFCO plans to build up its global logistics and processing systems next year, handling products such as corn, soybeans, rapeseed oil, sugar and wheat, Ning said.
"Some deals are now being negotiated. We will invest wherever it is necessary," Ning said, suggesting the total amount could be huge. "We have laid the groundwork for expansion," he said, without giving further details.
In November, COFCO announced plans to invest overseas through mergers and acquisitions over the next five years. The company will focus on a number of foreign markets including the United States, Australia and Southeast Asia, said Jiang Hua, a board member.
Ma Wenfeng, a senior analyst at Beijing Orient Agribusiness Consultant Ltd, a major agricultural consultancy, said now was a good time for foreign acquisitions.
As developed countries are struggling with a sluggish economic recovery, Chinese companies could make acquisitions more cheaply, Ma said.
"Overseas expansion will make COFCO more competitive in the global food industry," he added.
With COFCO's overseas network, China's processing companies could import agricultural products at lower prices, Ma added.
"This will give Chinese companies more leeway in the international food market," he said.
According to the Ministry of Agriculture, China's agricultural trade surged to $122 billion in 2010 from $28 billion in 2001. Imports jumped to $72.6 billion in 2010 from $12 billion 10 years earlier, an annual rise of 22.3 percent.
A trade deficit in agricultural products also emerged and widened rapidly during these years. In 2010, China's trade deficit in the sector increased to $23 billion from $4.6 billion in 2004.
"With overseas investment, we could make use of resources in the international food market," Ning said.
Domestically, COFCO has expanded to cover agricultural production, processing and retailing. The company has so far cooperated with more than 1.55 million farming households.
The farmers grow crops on 233,000 hectares of farmland for COFCO's processing businesses.
"The farmers trust COFCO because we are a State-owned company. This is our advantage in competition," Ning said.
"We intend to foster a whole business chain from farms to consumers' tables, and we will continue striving to create value for farmers," he added.
Wednesday, December 28, 2011
Juice Maker eyes North American Orchards
Company plans to use mergers and acquisitions to expand overseas
BEIJING - Shaanxi Haisheng Fresh Fruit Co Ltd, the largest producer of apple-juice concentrate in the world, is planning to buy fruit orchards in the United States and Canada to expand its presence overseas, said a company official.
"It (the purchasing plan) is part of our strategic business transformation," said Li Rong, director of capital operations of the company. "We are looking for possible opportunities to use mergers and acquisitions to own fruit plantations in North America. And we aren't excluding opportunities to work on deals involving fruit-juice processing and distribution overseas if they are good enough," she said, declining to elaborate.
Nearly 15 years after Haisheng was established, the company was capable in 2010 of churning out 405,000 tons of apple-juice concentrate. That feat came following a series of investments in expansion at home and abroad, making the company the largest processor and provider of the concentrate.
In 2010, Haisheng's annual exports accounted for 25 percent of the nation's total exports and 25 percent of world trade in apple-juice concentrate.
Among its current clients are some of the best known companies in China and abroad: China Huiyuan Juice Group Ltd, the largest juice maker in China, Pepsico Inc and Coca-Cola Co, the largest beverage producers in the world.
In 2005, Haisheng was listed on the Hong Kong Stock Exchange.
"While we have gained a firm foothold in the global market, we are preparing for a strategic business transformation," she said. "The first step will be to develop the industrial upper chain through merger and acquisition deals overseas.
"We are discussing buying fruit orchards in the US and Canada."
Haisheng already has a strong presence in the US. The company set up a sales office there in 1998 and has become the largest provider of apple-juice concentrate in the American market, supplying 30 percent of the country's demand for juice.
"Now is a good time for us to develop our upstream business in North America, where the land is fertile and comparatively cheap," Li said.
Haisheng has a strong presence in other countries as well. It supplies 9 percent of the Europe Union's demand for juice, 46 percent of South Africa's and 29 percent of Russia's.
"We will also see if there are opportunities to expand overseas in the processing and distribution of fruit juice," she said.
The company has been trying to expand through acquisitions.
In 2010, Haisheng acquired Yitian Group, the China-based juice business of Japan's Itochu Corp, for $10.38 million
Under the agreement, Itochu will help Haisheng sell and distribute fruit juice products in Japan. The acquisition is expected to help Haisheng's production capacity increase by 15 percent, and the Chinese provider's market share in Japan is expected to increase to 40 percent from 8 percent.
Despite those successful acquisitions, Chinese companies still face difficulties in acquiring land overseas.
The government of Iceland recently rejected a proposal from the Chinese billionaire investor Huang Nubo, who wanted to buy 300 square kilometers of land on the northern part of the island for $200 million.
Explaining its rejection, the government said such a transfer of property would be "incompatible" with the country's laws.
China Daily
BEIJING - Shaanxi Haisheng Fresh Fruit Co Ltd, the largest producer of apple-juice concentrate in the world, is planning to buy fruit orchards in the United States and Canada to expand its presence overseas, said a company official.
"It (the purchasing plan) is part of our strategic business transformation," said Li Rong, director of capital operations of the company. "We are looking for possible opportunities to use mergers and acquisitions to own fruit plantations in North America. And we aren't excluding opportunities to work on deals involving fruit-juice processing and distribution overseas if they are good enough," she said, declining to elaborate.
Nearly 15 years after Haisheng was established, the company was capable in 2010 of churning out 405,000 tons of apple-juice concentrate. That feat came following a series of investments in expansion at home and abroad, making the company the largest processor and provider of the concentrate.
In 2010, Haisheng's annual exports accounted for 25 percent of the nation's total exports and 25 percent of world trade in apple-juice concentrate.
Among its current clients are some of the best known companies in China and abroad: China Huiyuan Juice Group Ltd, the largest juice maker in China, Pepsico Inc and Coca-Cola Co, the largest beverage producers in the world.
In 2005, Haisheng was listed on the Hong Kong Stock Exchange.
"We are discussing buying fruit orchards in the US and Canada."
Haisheng already has a strong presence in the US. The company set up a sales office there in 1998 and has become the largest provider of apple-juice concentrate in the American market, supplying 30 percent of the country's demand for juice.
"Now is a good time for us to develop our upstream business in North America, where the land is fertile and comparatively cheap," Li said.
Haisheng has a strong presence in other countries as well. It supplies 9 percent of the Europe Union's demand for juice, 46 percent of South Africa's and 29 percent of Russia's.
"We will also see if there are opportunities to expand overseas in the processing and distribution of fruit juice," she said.
The company has been trying to expand through acquisitions.
In 2010, Haisheng acquired Yitian Group, the China-based juice business of Japan's Itochu Corp, for $10.38 million
Under the agreement, Itochu will help Haisheng sell and distribute fruit juice products in Japan. The acquisition is expected to help Haisheng's production capacity increase by 15 percent, and the Chinese provider's market share in Japan is expected to increase to 40 percent from 8 percent.
Despite those successful acquisitions, Chinese companies still face difficulties in acquiring land overseas.
The government of Iceland recently rejected a proposal from the Chinese billionaire investor Huang Nubo, who wanted to buy 300 square kilometers of land on the northern part of the island for $200 million.
Explaining its rejection, the government said such a transfer of property would be "incompatible" with the country's laws.
China Daily
(China Daily 12/20/2011 page16
Tuesday, December 6, 2011
Unity is the key for China's top private firms
A new chamber of commerce has been established to help companies challenge in foreign markets
BEIJING - Some of China's largest private companies have decided to unite to develop overseas markets, as an increasing number of them aspire to develop into global players.
The China International Chamber of Commerce for the Private Sector (CICCPS) was established in Beijing on Thursday. It has more than 100 members, including some of the country's biggest private companies, such as Geely Automobile Holdings Ltd, the auto giant that bought Sweden's Volvo AB last year, and New Hope Group Ltd, China's largest producer of animal feed.
The aim of the CICCPS is that private companies will help each other in overseas investment, including the provision of coordination between domestic and foreign government agencies, and in setting up platforms to obtain financing.
"Internationalization has become the strategy for many Chinese companies," said Zheng Yuewen, chairman of the organization. "They need to develop on a global scale and be internationally competitive."
The country's 7.5 million private-owned companies have become a major force in overseas investment. In the next three years, one-third of them will set up sales networks overseas and a quarter of them will establish offices in other countries, according to Guo Guangchang, chairman of Fosun International Ltd, one of China's largest conglomerates.
The private enterprises might also be able to benefit from China's vast foreign-exchange reserves when making overseas investments, according to some members. So far, the foreign-exchange reserves - totaling more than $3 trillion - have mainly been used to aid the overseas expansion of State-owned companies.
"The investment of our foreign-exchange reserves should be more diversified, and private business is an important channel," said Wu Xiaoqiu, director of the Financial and Securities Institute of Renmin University of China.
"Private companies have more advantages in their decision-making systems, and they are also better at executing plans compared with State-owned enterprises," said Wang Jianxi, executive vice-president and chief risk officer of China Investment Corp, the country's sovereign wealth fund.
The overseas development of Chinese private enterprise has already attracted foreign investors. In July, the British financier Jacob Rothschild said that his RIT Capital Partners will set up a private-equity fund of $750 million with members of the CICCPS to aid the development of Chinese companies overseas.
Many of the country's private enterprises compete with each other at the low-end while doing business overseas, said Yin Mingshan, chairman of Lifan Industry (Group) Co Ltd, a leading motorcycle manufacturer. "They compete by offering the lowest price possible, and hurt each other as a result. Joining the chamber will make them more self-disciplined," he said.
China Daily
(China Daily 11/25/2011 page15)
BEIJING - Some of China's largest private companies have decided to unite to develop overseas markets, as an increasing number of them aspire to develop into global players.
The China International Chamber of Commerce for the Private Sector (CICCPS) was established in Beijing on Thursday. It has more than 100 members, including some of the country's biggest private companies, such as Geely Automobile Holdings Ltd, the auto giant that bought Sweden's Volvo AB last year, and New Hope Group Ltd, China's largest producer of animal feed.
The aim of the CICCPS is that private companies will help each other in overseas investment, including the provision of coordination between domestic and foreign government agencies, and in setting up platforms to obtain financing.
"Internationalization has become the strategy for many Chinese companies," said Zheng Yuewen, chairman of the organization. "They need to develop on a global scale and be internationally competitive."
The country's 7.5 million private-owned companies have become a major force in overseas investment. In the next three years, one-third of them will set up sales networks overseas and a quarter of them will establish offices in other countries, according to Guo Guangchang, chairman of Fosun International Ltd, one of China's largest conglomerates.
The private enterprises might also be able to benefit from China's vast foreign-exchange reserves when making overseas investments, according to some members. So far, the foreign-exchange reserves - totaling more than $3 trillion - have mainly been used to aid the overseas expansion of State-owned companies.
"The investment of our foreign-exchange reserves should be more diversified, and private business is an important channel," said Wu Xiaoqiu, director of the Financial and Securities Institute of Renmin University of China.
"Private companies have more advantages in their decision-making systems, and they are also better at executing plans compared with State-owned enterprises," said Wang Jianxi, executive vice-president and chief risk officer of China Investment Corp, the country's sovereign wealth fund.
The overseas development of Chinese private enterprise has already attracted foreign investors. In July, the British financier Jacob Rothschild said that his RIT Capital Partners will set up a private-equity fund of $750 million with members of the CICCPS to aid the development of Chinese companies overseas.
Many of the country's private enterprises compete with each other at the low-end while doing business overseas, said Yin Mingshan, chairman of Lifan Industry (Group) Co Ltd, a leading motorcycle manufacturer. "They compete by offering the lowest price possible, and hurt each other as a result. Joining the chamber will make them more self-disciplined," he said.
China Daily
(China Daily 11/25/2011 page15)
Sunday, November 20, 2011
IPO Weakness in China drives shift by PE Investors
By Cai Xiao
China Daily
BEIJING - As it becomes tougher to exit their investments through IPOs, Chinese private-equity (PE) participants are prioritizing performance improvement and seeking other exit strategies such as secondary buyouts and strategic purchases, according to a report released on Thursday.
Grant Thornton International, a leading accounting and consulting organization, interviewed 144 top PE professionals around the world.
The report said that nearly 44 percent of the respondents now view performance improvement as the main way to drive value, with just 2 percent citing financial engineering as a value driver.
"As the market develops, people will have to think harder about their strategy. In the past, they did well in multiple arbitrage between the public and private markets, but things have changed," the report quoted a Chinese survey respondent as saying.
Grant Thornton China Partner Liu Dongdong, one of the authors of the report, said that PE firms cannot rely on arbitrage in the current environment.
"In China, building value comes down to earnings growth. They need to demonstrate that they have delivered tangible improvements to the business, such as improvements to the performance and strengthening of the management team," said Liu.
The report said that while public market sentiment is perceived to be working in favor of PE in markets such as Brazil and India, that's less likely to be true on the Chinese mainland.
"Among the latest four Chinese companies seeking IPOs, three failed," Liu said. That outcome "signals the exit channel of an IPO has become more difficult".
According to China Venture Group, a leading domestic PE research agency, 214 Chinese companies listed domestically and overseas in the first half, of which 100 had capital injections from PE or venture capital (VC) firms.
But in the third quarter, the number of newly listed companies with a PE or VC background decreased to 43.
The report also said that while PE managers in the BRICS countries (Brazil, Russia, India, China and South Africa) have seen an increase in exit activity, many on the Chinese mainland expect to see falling realizations.
Globally, IPO exits stand at a mere 14 percent as opposed to 37 percent in BRICS economies, but the option of a secondary buyout in BRICS economies (20 percent) is less common than in global economies (32 percent).
Trade sales are the most prevalent method of exit for both BRICS (43 percent) and global economies (53 percent), the report found.
China Daily
BEIJING - As it becomes tougher to exit their investments through IPOs, Chinese private-equity (PE) participants are prioritizing performance improvement and seeking other exit strategies such as secondary buyouts and strategic purchases, according to a report released on Thursday.
Grant Thornton International, a leading accounting and consulting organization, interviewed 144 top PE professionals around the world.
The report said that nearly 44 percent of the respondents now view performance improvement as the main way to drive value, with just 2 percent citing financial engineering as a value driver.
"As the market develops, people will have to think harder about their strategy. In the past, they did well in multiple arbitrage between the public and private markets, but things have changed," the report quoted a Chinese survey respondent as saying.
Grant Thornton China Partner Liu Dongdong, one of the authors of the report, said that PE firms cannot rely on arbitrage in the current environment.
"In China, building value comes down to earnings growth. They need to demonstrate that they have delivered tangible improvements to the business, such as improvements to the performance and strengthening of the management team," said Liu.
The report said that while public market sentiment is perceived to be working in favor of PE in markets such as Brazil and India, that's less likely to be true on the Chinese mainland.
"Among the latest four Chinese companies seeking IPOs, three failed," Liu said. That outcome "signals the exit channel of an IPO has become more difficult".
According to China Venture Group, a leading domestic PE research agency, 214 Chinese companies listed domestically and overseas in the first half, of which 100 had capital injections from PE or venture capital (VC) firms.
But in the third quarter, the number of newly listed companies with a PE or VC background decreased to 43.
The report also said that while PE managers in the BRICS countries (Brazil, Russia, India, China and South Africa) have seen an increase in exit activity, many on the Chinese mainland expect to see falling realizations.
Globally, IPO exits stand at a mere 14 percent as opposed to 37 percent in BRICS economies, but the option of a secondary buyout in BRICS economies (20 percent) is less common than in global economies (32 percent).
Trade sales are the most prevalent method of exit for both BRICS (43 percent) and global economies (53 percent), the report found.
Shaping the new economy
Its extremelly important for companies to realise the R&D dynamic in China that is necessary to grow market share in China.
Shaping the new economy
The auto sector has often been seen as a classic example. Beginning in the 1980s, a foreign firm could only assemble automobiles in China through a joint venture (JV) with a Chinese firm, and it was not allowed to have a majority stake in these JVs. Local content regulations mandated that a gradually increasing percentage of the components that went into the car had to be purchased from firms operating in China. Winning approval for new contracts often hinged on a willingness to establish research and development centers (R&D) in China.
What was the outcome of these efforts to strong-arm foreign firms? Critics say very little. Rather than create "R&D" centers in China, foreign firms created what skeptics called "PR&D" centers, ones that achieved more for the firm's public (and government) relations than actual research and development. Although this skeptical view is overstated, it does capture an important point: in a world of global production and virtually-linked R&D efforts, it is not always easy to force a multinational firm to locate R&D in any particular location. It is a game of cat-and-mouse.
But a strange thing happened during this game of cat-and-mouse: somewhere along the way, the mouse stopped running away. In certain strategic sectors (e.g. aeronautics, new energy vehicles, high-speed rail), the traditional view continues to be correct - the Chinese government exerts leverage where it can and foreign firms do what they can to limit the loss of their core technologies - but in other sectors, R&D centers in China have become a normal part of a multinational's portfolio of activities in China and the activities they undertake are far more substantial than in the past.
This shift is largely a result of self-interest as multinational firms find it difficult to compete in the Chinese market without an R&D operation to support the effort.
First, the Chinese market often demands products that are significantly different from global products. Whether due to the particular features of the product or the cost of the product, it is no longer possible to assume that slight adaptations of a global product will be sufficient.
Second, the Chinese market changes rapidly, and it is difficult to keep up with the change without having a design center in China. This is partly organizational - a global design center that is located on the other side of the world has many demands on its resources - but it is also the "feel" for the market. A European engineer working on the design of construction equipment such as a wheel-loader, for example, will instinctually add more features to the machine if it will improve quality and performance even if this comes at a higher cost. A Chinese engineer will think about the balance between cost and performance very differently. Engineering is more "frugal" as a result.
Third, controlling cost in China requires aggressive localization, and localization necessitates extensive coordination and cooperation with low-cost Chinese suppliers. The engineers in an R&D center will adapt component designs so that they are more readily manufactured by local suppliers and their supplier development teams will go into the field to ensure that suppliers are able to meet the quality standards.
Although the domestic market in China usually drives the growth of R&D centers, they often will quickly become integrated in global R&D efforts and support activities outside of China.
In the longer-term, the knowledge that is gained about "frugal engineering" will be more important. In a global economy in which the primary engines of growth are in developing countries, China provides an opportunity to re-think design and innovation. Ironically, rather than fearing the loss of technology from China-based R&D centers, global firms may end up utilizing these centers as critical listening posts in a new world of innovation.
The author is a lecturer in Chinese business studies at the Said Business School, Oxford University.
Shaping the new economy
Updated: 2011-11-11 09:02
By Eric Thun (China Daily)R&D centers in China provide an opportunity for companies to re-think design, innovation
It has long been acknowledged that access to the Chinese market came with a price - technology. If a foreign firm wants to play within the Chinese domestic market, it has to play by China's rules and in many sectors, these rules are designed to transfer technological skills to Chinese firms.The auto sector has often been seen as a classic example. Beginning in the 1980s, a foreign firm could only assemble automobiles in China through a joint venture (JV) with a Chinese firm, and it was not allowed to have a majority stake in these JVs. Local content regulations mandated that a gradually increasing percentage of the components that went into the car had to be purchased from firms operating in China. Winning approval for new contracts often hinged on a willingness to establish research and development centers (R&D) in China.
What was the outcome of these efforts to strong-arm foreign firms? Critics say very little. Rather than create "R&D" centers in China, foreign firms created what skeptics called "PR&D" centers, ones that achieved more for the firm's public (and government) relations than actual research and development. Although this skeptical view is overstated, it does capture an important point: in a world of global production and virtually-linked R&D efforts, it is not always easy to force a multinational firm to locate R&D in any particular location. It is a game of cat-and-mouse.
But a strange thing happened during this game of cat-and-mouse: somewhere along the way, the mouse stopped running away. In certain strategic sectors (e.g. aeronautics, new energy vehicles, high-speed rail), the traditional view continues to be correct - the Chinese government exerts leverage where it can and foreign firms do what they can to limit the loss of their core technologies - but in other sectors, R&D centers in China have become a normal part of a multinational's portfolio of activities in China and the activities they undertake are far more substantial than in the past.
This shift is largely a result of self-interest as multinational firms find it difficult to compete in the Chinese market without an R&D operation to support the effort.
First, the Chinese market often demands products that are significantly different from global products. Whether due to the particular features of the product or the cost of the product, it is no longer possible to assume that slight adaptations of a global product will be sufficient.
Second, the Chinese market changes rapidly, and it is difficult to keep up with the change without having a design center in China. This is partly organizational - a global design center that is located on the other side of the world has many demands on its resources - but it is also the "feel" for the market. A European engineer working on the design of construction equipment such as a wheel-loader, for example, will instinctually add more features to the machine if it will improve quality and performance even if this comes at a higher cost. A Chinese engineer will think about the balance between cost and performance very differently. Engineering is more "frugal" as a result.
Third, controlling cost in China requires aggressive localization, and localization necessitates extensive coordination and cooperation with low-cost Chinese suppliers. The engineers in an R&D center will adapt component designs so that they are more readily manufactured by local suppliers and their supplier development teams will go into the field to ensure that suppliers are able to meet the quality standards.
Although the domestic market in China usually drives the growth of R&D centers, they often will quickly become integrated in global R&D efforts and support activities outside of China.
In the longer-term, the knowledge that is gained about "frugal engineering" will be more important. In a global economy in which the primary engines of growth are in developing countries, China provides an opportunity to re-think design and innovation. Ironically, rather than fearing the loss of technology from China-based R&D centers, global firms may end up utilizing these centers as critical listening posts in a new world of innovation.
The author is a lecturer in Chinese business studies at the Said Business School, Oxford University.
Wednesday, November 16, 2011
COFCO to expand overseas M&A
Food giant looking for takeover and merger deals in foreign countries.
COFCO Ltd grain products on display at the 11th China International Exhibition for Grain and Oil Products, Equipment and Technology held in Ningbo, Zhejiang province. Zhang Peijian / for China Daily
BEIJING - China National Cereals, Oils and Foodstuffs Corp Limited (COFCO), the country's largest trader of grains, said it is seeking overseas acquisitions. Any purchases would help to secure supplies of commodities including soybeans, wheat and sugar as rising domestic incomes spur faster food demand growth.
The State-owned COFCO is looking for investments in the United States, South America, Australia and Russia, said Frank Ning, the company chairman, in an interview in Beijing. He did not identify which companies were under consideration.
"I'm trying to connect the Chinese consumer market with outside sources," Ning said on Thursday. "Whatever the Chinese consume more of, need greater supplies of from outside, this is our area," he said. The company may become engaged in farming, logistics, processing, and trading ventures in supplier countries, he said.
Securing external food supplies is becoming increasingly important after urban household incomes in China more than tripled in the past decade, fueling consumption of meat, poultry and dairy products. China, which last year became a net importer of corn for the first time in more than 10 years, may have bought as much as 3.5 million metric tons in the first half, according to the researcher Grain.gov.cn on Oct 13.
China may have to increase imports because its dependence on the use of ground water for grain production "isn't going to be sustainable indefinitely", said Arthur Kroeber, managing director of Beijing-based GaveKal Dragonomics Research, a financial advisory firm.
Corn imports may surge to as much as 20 million tons annually by 2015, while rice imports may total 8 million tons, said Sunny Verghese, CEO of Olam International Ltd on Tuesday.
"Today China will have to look at global sources to balance its demand," Ning said. Corn has become particularly "tight" because of its wider application outside the livestock industry, such as paper-making and pharmaceutical use, he said.
China may be putting off "inevitable" large grain imports for 10 to 20 years to enable the opportunity to "develop companies like COFCO as domestic alternatives to Cargill (Inc) and give them some sense of security of supply", said Kroeber.
While the government has limited the expansion of corn-based industry to ensure a priority for livestock, "it's difficult to control demand for starch" and other corn-derived products because there's a strong demand for them, he said. So "either we produce here, or buy from outside", he said.
China has become more transparent in the past five years by disclosing grain reserves and by signaling that it wants to boost imports of corn and pork, Ning said.
Still, the world's biggest grower of grain will probably remain mostly self-sufficient in wheat and rice, Ning said. China's 1.3 billion people consume 160 million tons of rice annually, so no country can "fill the gap, if China produces a gap", he said. Thailand, the biggest exporter, only exports 8 million tons, said Ning.
Bloomberg News
COFCO Ltd grain products on display at the 11th China International Exhibition for Grain and Oil Products, Equipment and Technology held in Ningbo, Zhejiang province. Zhang Peijian / for China Daily
BEIJING - China National Cereals, Oils and Foodstuffs Corp Limited (COFCO), the country's largest trader of grains, said it is seeking overseas acquisitions. Any purchases would help to secure supplies of commodities including soybeans, wheat and sugar as rising domestic incomes spur faster food demand growth.
The State-owned COFCO is looking for investments in the United States, South America, Australia and Russia, said Frank Ning, the company chairman, in an interview in Beijing. He did not identify which companies were under consideration.
"I'm trying to connect the Chinese consumer market with outside sources," Ning said on Thursday. "Whatever the Chinese consume more of, need greater supplies of from outside, this is our area," he said. The company may become engaged in farming, logistics, processing, and trading ventures in supplier countries, he said.
Securing external food supplies is becoming increasingly important after urban household incomes in China more than tripled in the past decade, fueling consumption of meat, poultry and dairy products. China, which last year became a net importer of corn for the first time in more than 10 years, may have bought as much as 3.5 million metric tons in the first half, according to the researcher Grain.gov.cn on Oct 13.
China may have to increase imports because its dependence on the use of ground water for grain production "isn't going to be sustainable indefinitely", said Arthur Kroeber, managing director of Beijing-based GaveKal Dragonomics Research, a financial advisory firm.
Corn imports may surge to as much as 20 million tons annually by 2015, while rice imports may total 8 million tons, said Sunny Verghese, CEO of Olam International Ltd on Tuesday.
"Today China will have to look at global sources to balance its demand," Ning said. Corn has become particularly "tight" because of its wider application outside the livestock industry, such as paper-making and pharmaceutical use, he said.
China may be putting off "inevitable" large grain imports for 10 to 20 years to enable the opportunity to "develop companies like COFCO as domestic alternatives to Cargill (Inc) and give them some sense of security of supply", said Kroeber.
While the government has limited the expansion of corn-based industry to ensure a priority for livestock, "it's difficult to control demand for starch" and other corn-derived products because there's a strong demand for them, he said. So "either we produce here, or buy from outside", he said.
China has become more transparent in the past five years by disclosing grain reserves and by signaling that it wants to boost imports of corn and pork, Ning said.
Still, the world's biggest grower of grain will probably remain mostly self-sufficient in wheat and rice, Ning said. China's 1.3 billion people consume 160 million tons of rice annually, so no country can "fill the gap, if China produces a gap", he said. Thailand, the biggest exporter, only exports 8 million tons, said Ning.
Bloomberg News
(China Daily 10/22/2011 page9)
Monday, November 7, 2011
For many Chinese startups, IPOs' are the exit strategy
(iChinaStock News) There are still too few billion-dollar Chinese Internet companies to make acquisition a viable exit strategy for startups, shared Hurst Lin, a general partner at venture capital firm DCM. China’s market today does not have serial acquirers like Cisco, HP, Oracle, Apple, or Google, which means the exit strategy for Chinese startups is an IPO, usually in the US.
To move the needle for institutional investors requires $300-400 million to start, said Lin in an interview at the TechCrunch Disrupt Beijing conference. At present, there are simply to few Chinese Internet firms who can swallow an investment of that size.
Even the Chinese companies who could make acquisitions don’t often do so. Hurst Lin, who was also on the founding team of Sina (NASDAQ: SINA) said there were two psychological barriers for Chinese companies, most of whom are still run by their original founders:
First, founders, because they start off scrappy, tend to be very cheap in how they pay. Professional managers are willing to pay far higher because they’re building their ‘strategic track record’… It’s much easier for a person who’s playing with other people’s money–meaning a hired CEO–than a person who actually started the company with just three people. When I was at Sina, it was very very difficult for all of us–the founding team–to really be willing to pay a lot for a company.
And second, we [the founders] have the lion’s share of the company. And then we have a bunch of early employees who have been with us 5-10 years–and if you look at their stock options, it doesn’t work out. Here’s a guy who followed me for the last 5 years and the most he’ll make is about one or two million bucks… and if a company you want to acquire is going for $300 million, then there’s this other guy, who just started his company 3-4 years ago, and he’ll become a division of SINA. His take-home pay, with the acquisition, will be a minimum of $70 million.
What does that do to the morale of your rank-and-file employees? You basically force the rank-and-file out of your company. So that psychology works in reverse because we don’t want them to leave.
An alternative explanation, commonly heard in the industry, is that Chinese Internet giants don’t acquire because they would rather hire away an engineer and copy the service themselves.
One promising sign for the industry is that Chinese Internet companies like Tencent and Baidu are now making more strategic investments, although acquisitions are still rare.
Hurst Lin also shared that there are currently at least 10 Chinese Internet companies who have made confidential filings with the SEC and are waiting to IPO in the US.
By Kai Lukoff, iChinaStock.com
To move the needle for institutional investors requires $300-400 million to start, said Lin in an interview at the TechCrunch Disrupt Beijing conference. At present, there are simply to few Chinese Internet firms who can swallow an investment of that size.
Even the Chinese companies who could make acquisitions don’t often do so. Hurst Lin, who was also on the founding team of Sina (NASDAQ: SINA) said there were two psychological barriers for Chinese companies, most of whom are still run by their original founders:
First, founders, because they start off scrappy, tend to be very cheap in how they pay. Professional managers are willing to pay far higher because they’re building their ‘strategic track record’… It’s much easier for a person who’s playing with other people’s money–meaning a hired CEO–than a person who actually started the company with just three people. When I was at Sina, it was very very difficult for all of us–the founding team–to really be willing to pay a lot for a company.
And second, we [the founders] have the lion’s share of the company. And then we have a bunch of early employees who have been with us 5-10 years–and if you look at their stock options, it doesn’t work out. Here’s a guy who followed me for the last 5 years and the most he’ll make is about one or two million bucks… and if a company you want to acquire is going for $300 million, then there’s this other guy, who just started his company 3-4 years ago, and he’ll become a division of SINA. His take-home pay, with the acquisition, will be a minimum of $70 million.
What does that do to the morale of your rank-and-file employees? You basically force the rank-and-file out of your company. So that psychology works in reverse because we don’t want them to leave.
An alternative explanation, commonly heard in the industry, is that Chinese Internet giants don’t acquire because they would rather hire away an engineer and copy the service themselves.
One promising sign for the industry is that Chinese Internet companies like Tencent and Baidu are now making more strategic investments, although acquisitions are still rare.
Hurst Lin also shared that there are currently at least 10 Chinese Internet companies who have made confidential filings with the SEC and are waiting to IPO in the US.
By Kai Lukoff, iChinaStock.com
Wednesday, October 26, 2011
Would Steve Jobs have been successful in China?
I saw this article in a recent edition of the China Daily USA Weekly and thought that it was an interesting article from the perspective of China business and management style compared to Steve Jobs who was enormously successful. While it is easy to stereotype the China Management style and things are changing slowly, the ending assumption is that it would have been much more difficult for Steve Jobs in China but I would hasten to say that I believe he would have found a way.
The passing away of Steve Jobs recently has led to the sort of media attention usually reserved for entertainment superstars or heads of state. Yet no one can deny the attention and adulation is unwarranted. Jobs' was the first, and only, technology superstar.
So, would Jobs' approach lead to such fantastic achievements inside a Chinese business?
To find answers to this question it behoves us to examine Jobs' distinctive approach to business.
Challenging the status quo:
Jobs appears to have thrived on stepping into the unknown and taking on accepted wisdom and business practices. Jobs eschewed traditional, and even more modern, market research methods, in favor of his, and only his, instinct. This may have worked well inside a US company and Jobs' staff appear to have been inspired by such an approach. But inside a Chinese company this would have caused huge disquiet and would almost certainly have led to Jobs being marginalized and soon forced out. Younger generations in China may be slightly less conservative but those born before 1980, the key decision-makers, would act very quickly in the event of anyone rocking the boat.
Innovative, radical thinking:
Despite the fact that this is much needed inside Chinese businesses, this would also probably unsettle many Chinese managers if it involves doing things for the first time. Such a pioneering approach is not the Chinese way, rather they are fast-followers. Jobs would most likely become frustrated inside a typical Chinese business with little room for creativity and innovation.
Engaging, entertaining and eye-catching public performances:
Jobs could hold an audience unlike most business leaders, bringing massive media attention to Apple's new product launches. Currently, Chinese business leaders make little effort at media and public engagement and would probably appear awkward and reluctant if they did. Younger generations may be more willing to enter the media spotlight and may relish a Jobs-like CEO though.
Loyalty and secrecy among his staff:
Jobs ensured maximum publicity for his innovations by creating and maintaining a corporate culture of loyalty to him and absolute secrecy about the work being carried out. At Apple the hardware teams were often completely unaware of the software teams' activity. This is very similar to the way a typical Chinese business operates, so Jobs would thrive in this respect. Chinese employees often feel personally attached to their company and their company's leaders.
Autocratic management style:
Clearly, Jobs' word was final throughout his career and those around him had to accept this or move on. Jobs had little time for lengthy meetings and management by committee, instead imposing his instinctive, intuitive judgment and implementing decision with the greatest speed and efficiency. Certainly Chinese company leaders appear to make decisions in a similarly exclusive manner, however there are often arduous meetings (during which decisions are rarely taken) and discussions before implementation. Jobs would find the bureaucracy and inefficiency that characterizes most large Chinese companies extremely frustrating.
Never-say-die attitude and constant desire for growth:
Jobs' dictionary did not contain the word "failure". He saw "problems" or "difficulties" as "opportunities" and thrived on pressure. Remember, Jobs' career hit rock bottom in 1985 when he was acrimoniously dismissed from Apple, having set up the company himself less than 10 years earlier.
Many would have reacted negatively but not Jobs. Most would have vowed never to return to the company again but Jobs did and in 1999 took over the reins once again.
Praise also has to be paid to those at Apple who decided to recall Jobs. Such a decision would be most unlikely within a Chinese organization. Chinese managers would view such a recall as a huge loss of face even if there were overwhelmingly convincing business reasons. Had Jobs been fired from a Chinese company, there would probable have been no way back.
Jobs' ambition would also have made many Chinese managers nervous. Chinese companies appear to lack the inner self-belief required to succeed internationally, instead tip-toeing overseas with very tentative maneuvers. If Jobs put down a plan to take on the world and win, his Chinese colleagues would make every effort to water it down and suggest a more gradual, step-wise approach.
Focus on high-tech sector:
This is not widely discussed among Jobs' strengths yet there are all too many who achieve huge financial success who subsequently believe they can perform similar feats in other, often totally unrelated, industries. Branson is a prime example here, where cosmetics and soft drinks proved dismal commercial failures. Jobs, however, focused entirely on the high-tech sector and drove himself and his staff to ever more incredible breakthroughs. Unfortunately, the Chinese business environment is littered with rushed, get-rich-quick, reckless diversification.
Haier's venture into mobile phones and personal computers are examples of a stretch too far, almost certainly motivated by Haier's domination of the household appliance industry in China. Jobs would come under increasing pressure from colleagues inside a Chinese company to venture into whatever was considered a short-term money-making opportunity. For example, Jobs would have come under pressure to venture into the Chinese property market.
Down-to-earth, grounded self:
Jobs never allowed success to go to his head and never became arrogant or even complacent. His very casual, personal appearance (the trademark black roll-neck sweater, faded blue jeans and white running shoes) is testament to a humble attitude.
It appears that he was not driven by any need for attention nor could he be regarded as some sort of social climber. Instead, his primary motivation really was to stretch himself and those around him intellectually. Financial gain was very much secondary.
Had Jobs operated inside Chinese business culture he would have been expected to present his elite status very publicly with expensive cars and clothes. Jobs would have felt extremely uncomfortable with such conspicuous and ostentatious consumption. He chose an image of a humble, ordinary person, always trying to do something special. Chinese business does not work like that at all.
Steve Jobs deserves his place in history and will be talked about in the same breath as Einstein, Edision, Marconi, Bell and others who have transformed the world permanently and so dramatically. But Chinese businesses should also take an extremely close look at how he achieved this position and learn to move closer to the Jobs business model.
The author is a visiting British professor of brand management at China Agricultural University. The opinions expressed in the article do not necessarily reflect those of China Daily.
The passing away of Steve Jobs recently has led to the sort of media attention usually reserved for entertainment superstars or heads of state. Yet no one can deny the attention and adulation is unwarranted. Jobs' was the first, and only, technology superstar.
So, would Jobs' approach lead to such fantastic achievements inside a Chinese business?
To find answers to this question it behoves us to examine Jobs' distinctive approach to business.
Challenging the status quo:
Jobs appears to have thrived on stepping into the unknown and taking on accepted wisdom and business practices. Jobs eschewed traditional, and even more modern, market research methods, in favor of his, and only his, instinct. This may have worked well inside a US company and Jobs' staff appear to have been inspired by such an approach. But inside a Chinese company this would have caused huge disquiet and would almost certainly have led to Jobs being marginalized and soon forced out. Younger generations in China may be slightly less conservative but those born before 1980, the key decision-makers, would act very quickly in the event of anyone rocking the boat.
Innovative, radical thinking:
Despite the fact that this is much needed inside Chinese businesses, this would also probably unsettle many Chinese managers if it involves doing things for the first time. Such a pioneering approach is not the Chinese way, rather they are fast-followers. Jobs would most likely become frustrated inside a typical Chinese business with little room for creativity and innovation.
Engaging, entertaining and eye-catching public performances:
Jobs could hold an audience unlike most business leaders, bringing massive media attention to Apple's new product launches. Currently, Chinese business leaders make little effort at media and public engagement and would probably appear awkward and reluctant if they did. Younger generations may be more willing to enter the media spotlight and may relish a Jobs-like CEO though.
Loyalty and secrecy among his staff:
Jobs ensured maximum publicity for his innovations by creating and maintaining a corporate culture of loyalty to him and absolute secrecy about the work being carried out. At Apple the hardware teams were often completely unaware of the software teams' activity. This is very similar to the way a typical Chinese business operates, so Jobs would thrive in this respect. Chinese employees often feel personally attached to their company and their company's leaders.
Autocratic management style:
Clearly, Jobs' word was final throughout his career and those around him had to accept this or move on. Jobs had little time for lengthy meetings and management by committee, instead imposing his instinctive, intuitive judgment and implementing decision with the greatest speed and efficiency. Certainly Chinese company leaders appear to make decisions in a similarly exclusive manner, however there are often arduous meetings (during which decisions are rarely taken) and discussions before implementation. Jobs would find the bureaucracy and inefficiency that characterizes most large Chinese companies extremely frustrating.
Never-say-die attitude and constant desire for growth:
Jobs' dictionary did not contain the word "failure". He saw "problems" or "difficulties" as "opportunities" and thrived on pressure. Remember, Jobs' career hit rock bottom in 1985 when he was acrimoniously dismissed from Apple, having set up the company himself less than 10 years earlier.
Many would have reacted negatively but not Jobs. Most would have vowed never to return to the company again but Jobs did and in 1999 took over the reins once again.
Praise also has to be paid to those at Apple who decided to recall Jobs. Such a decision would be most unlikely within a Chinese organization. Chinese managers would view such a recall as a huge loss of face even if there were overwhelmingly convincing business reasons. Had Jobs been fired from a Chinese company, there would probable have been no way back.
Jobs' ambition would also have made many Chinese managers nervous. Chinese companies appear to lack the inner self-belief required to succeed internationally, instead tip-toeing overseas with very tentative maneuvers. If Jobs put down a plan to take on the world and win, his Chinese colleagues would make every effort to water it down and suggest a more gradual, step-wise approach.
Focus on high-tech sector:
This is not widely discussed among Jobs' strengths yet there are all too many who achieve huge financial success who subsequently believe they can perform similar feats in other, often totally unrelated, industries. Branson is a prime example here, where cosmetics and soft drinks proved dismal commercial failures. Jobs, however, focused entirely on the high-tech sector and drove himself and his staff to ever more incredible breakthroughs. Unfortunately, the Chinese business environment is littered with rushed, get-rich-quick, reckless diversification.
Haier's venture into mobile phones and personal computers are examples of a stretch too far, almost certainly motivated by Haier's domination of the household appliance industry in China. Jobs would come under increasing pressure from colleagues inside a Chinese company to venture into whatever was considered a short-term money-making opportunity. For example, Jobs would have come under pressure to venture into the Chinese property market.
Down-to-earth, grounded self:
Jobs never allowed success to go to his head and never became arrogant or even complacent. His very casual, personal appearance (the trademark black roll-neck sweater, faded blue jeans and white running shoes) is testament to a humble attitude.
It appears that he was not driven by any need for attention nor could he be regarded as some sort of social climber. Instead, his primary motivation really was to stretch himself and those around him intellectually. Financial gain was very much secondary.
Had Jobs operated inside Chinese business culture he would have been expected to present his elite status very publicly with expensive cars and clothes. Jobs would have felt extremely uncomfortable with such conspicuous and ostentatious consumption. He chose an image of a humble, ordinary person, always trying to do something special. Chinese business does not work like that at all.
Steve Jobs deserves his place in history and will be talked about in the same breath as Einstein, Edision, Marconi, Bell and others who have transformed the world permanently and so dramatically. But Chinese businesses should also take an extremely close look at how he achieved this position and learn to move closer to the Jobs business model.
The author is a visiting British professor of brand management at China Agricultural University. The opinions expressed in the article do not necessarily reflect those of China Daily.
(China Daily 10/14/2011 page9)
Friday, September 16, 2011
More Chinese Overseas Direct Investment urged
By Ding Qingfen, Tang Zhihao and Wei Tian (September 7, 2011 9:29 PM)
Held in Xiamen, the five-day investment fair has attracted 636 international organizations and 482 high-profile visitors from foreign governments, companies and institutions.
Bilateral trade between China and India is expected to reach $100 billion by 2015 from $62 billion in 2010, but "we also expect to increase the investment. We expect to attract Chinese companies to invest in India," said Indra Mani Pandey of the Indian Consulate General.
XIAMEN, Fujian province - A larger outflow of Chinese overseas direct investment (ODI) could help the global economy regain and sustain its growth momentum, even as uncertainties remain over the strength of the global recovery, said officials from both China and overseas.
"The deeper impact of the global financial crisis has expanded, and new uncertainties about the world economic recovery constantly appear," said Chen Deming, the Chinese minister of commerce, at the opening ceremony of the 15th China International Fair for Investment & Trade (CIFIT) on Wednesday.
"The enhancement of international cooperation and encouragement and support for Chinese ODI would be an effective way of adding vigor to the global economy and help to achieve robust, sustainable and balanced growth," said Chen.
Held in Xiamen, the five-day investment fair has attracted 636 international organizations and 482 high-profile visitors from foreign governments, companies and institutions.
Also on Wednesday, three Chinese ministries, including the Ministry of Commerce, released the 2011 industrial guidelines on China's Overseas Investment. The guidelines, which have been renewed annually since 2009, cover 115 foreign countries and include detailed regulations and information about each nation. The aim is to help Chinese companies invest in a more sustainable way, according to a statement on the commerce ministry website.
On Sept 6, the United Nations Conference on Trade and Development predicted that 2011 global economic growth would decline to 3.1 percent from 3.9 percent in 2010. Growth for the United States is predicted to be 2.3 percent, for the European Union it is 1.9 percent, while for Japan the figure is minus 0.4 percent. Meanwhile, Chinese growth is seen at 9.4 percent, while the figure is 8.1 percent for India.
While the global economy is troubled by debt crises and speculation abounds concerning a double-dip recession, Chinese investment is becoming increasingly important for the world. Participants at CIFIT welcomed the investment, believing that it may boost economic growth.
Bilateral trade between China and India is expected to reach $100 billion by 2015 from $62 billion in 2010, but "we also expect to increase the investment. We expect to attract Chinese companies to invest in India," said Indra Mani Pandey of the Indian Consulate General.
Pandey said Chinese companies are welcome to invest in sectors such as infrastructure, automobiles, energy and machine making.
This is the first time that India attended the fair. "CIFIT is an important platform for India to seek opportunities for cooperation with Chinese companies," Pandey said.
"Many of them (the companies) do not know the investment environment and how to benefit from it. We have to convince them that we have the technological manpower and a vast consumer market."
Wang Shengwen, deputy director-general of the Department of Outward Investment and Economic Cooperation at the Ministry of Commerce, said that the growing debt crises will provide Chinese companies with a great number of foreign investment opportunities during the next two decades.
"Developed regions, including the US and the European Union, Australia and emerging markets" very much welcome China's investment, said Wang.
"We expect to see more investment from China, because Algeria is the largest market in Africa by population," said Safia Kouiret, assistant to the director-general of the Algerian Ministry of Industry and Investment Promotion.
Algeria plans to allocate $286 billion to attract overseas investment in a number of projects, including the construction of highways, schools, medical centers and airports. "Chinese investment is very important for us and our experience as a growing economy during the past three decades" needs to be understood, Kouiret said.
Together with countries such as Sudan, Algeria is a top African destination for Chinese overseas investment. "Chinese investment means discipline, quality and an interesting price," she said.It's not only about emerging markets, as those from developed economies have also voiced their enthusiasm.
"If Chinese companies invest in Lithuania, they are investing in the European market. This is our value to Chinese companies," said Rimantas Zylius, economy minister of the Republic of Lithuania.
"The Chinese economy is ready to go outside, we believe we can benefit from China," he said, adding that Chinese companies are welcome to invest in high-tech industries such as pharmaceuticals.
While the developed economies have expressed an interest in Chinese investment, they have also set up barriers in some cases. However, according to Zylius: "What is important is that China is opening up and European countries are investing in China. It is important that Chinese companies get the same treatment in Europe as European companies receive in China."
In 2010, China overtook Japan and the United Kingdom to become the world's fifth-largest overseas investing nation as the volume of investment surged by 21.7 percent to $68.8 billion.
Regions including Oceania and EU have witnessed the most rapid investment growth in the past few years, although the Asia-Pacific region and Latin America are the top two in absorbing Chinese investment by volume.
As "the biggest construction site in Europe, Poland will see record Chinese investment this year", despite initial failures, said Andrzej Pieczonka, first counsellor at the Polish Consulate General in Shanghai.
Sunday, September 4, 2011
It looks like Bright Foods has finally succeeded in an overseas acquisition. A key strategy is to build perception of quality at home by owning western companies - this also will work for the Flavor & Fragrance industry equally.
Bright Foods announced the acquisition of Australian manufacturer Massanen Foods this week. This, combined with speculation that it has shown an interest in a number of other international players hints at the scale of its plans. What exactly are Bright Foods' ambitions? Dean Best reports. By: Dean Best - 19th Aug 2011 just-food
For some time, there have been indications that Bright Food, China's state-backed food and beverage company, wants to be a force on the world stage.
If reports over the last 12 months are to be believed, China's state-backed Bright Food, keen to expand overseas, has held talks or lodged an interest in some of the best-known food makers in the West.
UK-based snacks group United Biscuits, yoghurt giant Yoplait and US vitamin retailer GNC are all said to have been on Bright Food's radar but, for one reason or another, no deals were made.
Bright Food did succeed with one transaction, the acquisition of a majority stake in New Zealand dairy firm Synlait in July.
Nevertheless, the failure to close a deal for UB, Yoplait and GNC, plus its defeat in the battle for Australian sugar processor Sucrogen, has raised questions about the seriousness of Bright Food's ambition - and its ability - to expand overseas.
However, the announcement Wednesday (17 August) that Bright Food had secured a 75% stake in Australian food producer and importer Manassen Foods could quieten the doubters. The deal, struck for an undisclosed sum but reported to value Manassen at A$500m, is Bright Food's biggest foray outside China.
Bright Food chairman Wang Zongnan pointed out the "synergies" the deal - which remains subject to approval from Australia's foreign investment regulator - could bring. Both companies, he said, could benefit from taking their products into the companies' respective domestic markets.
Whether Australian consumers would be ready to buy, for example, Chinese dairy products is debatable, given the recent food safety scares in the country. However, China provides acquires in place.
"Any company I am going to acquire must have an outstanding management team and I want that team to continue working for us because Bright has insufficient knowledge of international markets," Wang said.
For all the headlines around Bright Food's interest in the likes of UB and Yoplait, the Manassen and Synlait deals, opportunities for Manassen, not least, ironically, in dairy. Manassen, which is the distributor in Australia for brands owned by food makers in Europe like Premier Foods plc and Arla Foods, also has its own brands, including products under The Margaret River Dairy Company label. China's food scandals have also had an impact at home; concerned about safety, wealthy consumers have increasingly sought out imported dairy products.
Roy Manassen, the son of the company's founder, certainly seemed upbeat about the potential for Manassen in China and, he said, in Asia, too. "Our backyard has just grown significantly and we have the opportunity to make a major contribution into the most exciting region on the planet. I am very pleased to be part of it," he said.
Mr Manassen and other executives in the Australian company will keep a stake in the business and likely to be retained by Bright Food. Earlier this year, Wang told The Financial Times that he plans to keep the existing management teams of any companies Bright Food should, according to one industry consultant in China, help the company more effectively build its understanding of overseas markets.
"Acquiring a smaller brand in a more bounded market may make it easier to learn how to integrate a non-China based and owned-entity into the group, instead of going through that process with multi-category, multi-country business," Torsten Stocker, partner at management consulting firm Monitor Group's Shanghai office, tells just-food.
However, Stocker believes that, ultimately, Bright Food's ambitions reach beyond Asia-Pacific. He says the company wants to see a "significant increase in revenue". In 2009, Bright Food's turnover was CNY76bn, Stocker says and, by 2015, he claims the company wants sales of CNY110bn.
"From what I understand, they want to become a major food and beverage player globally, covering the full value chain, from basic resources to retail," Stocker says. "My sense is that they view themselves more as competing with a Nestle rather than with other Chinese players focusing on China only."
Manassen could be the latest in a line of acquisitions by the Shanghai-based, state-owned group. Bright Food's mettle has been tested by its failed pursuits of companies in Europe and the US but, by finding success close to home, they could find the ingredient to success further afield.
Bright Foods announced the acquisition of Australian manufacturer Massanen Foods this week. This, combined with speculation that it has shown an interest in a number of other international players hints at the scale of its plans. What exactly are Bright Foods' ambitions? Dean Best reports. By: Dean Best - 19th Aug 2011 just-food
For some time, there have been indications that Bright Food, China's state-backed food and beverage company, wants to be a force on the world stage.
If reports over the last 12 months are to be believed, China's state-backed Bright Food, keen to expand overseas, has held talks or lodged an interest in some of the best-known food makers in the West.
UK-based snacks group United Biscuits, yoghurt giant Yoplait and US vitamin retailer GNC are all said to have been on Bright Food's radar but, for one reason or another, no deals were made.
Bright Food did succeed with one transaction, the acquisition of a majority stake in New Zealand dairy firm Synlait in July.
Nevertheless, the failure to close a deal for UB, Yoplait and GNC, plus its defeat in the battle for Australian sugar processor Sucrogen, has raised questions about the seriousness of Bright Food's ambition - and its ability - to expand overseas.
However, the announcement Wednesday (17 August) that Bright Food had secured a 75% stake in Australian food producer and importer Manassen Foods could quieten the doubters. The deal, struck for an undisclosed sum but reported to value Manassen at A$500m, is Bright Food's biggest foray outside China.
Bright Food chairman Wang Zongnan pointed out the "synergies" the deal - which remains subject to approval from Australia's foreign investment regulator - could bring. Both companies, he said, could benefit from taking their products into the companies' respective domestic markets.
Whether Australian consumers would be ready to buy, for example, Chinese dairy products is debatable, given the recent food safety scares in the country. However, China provides acquires in place.
"Any company I am going to acquire must have an outstanding management team and I want that team to continue working for us because Bright has insufficient knowledge of international markets," Wang said.
For all the headlines around Bright Food's interest in the likes of UB and Yoplait, the Manassen and Synlait deals, opportunities for Manassen, not least, ironically, in dairy. Manassen, which is the distributor in Australia for brands owned by food makers in Europe like Premier Foods plc and Arla Foods, also has its own brands, including products under The Margaret River Dairy Company label. China's food scandals have also had an impact at home; concerned about safety, wealthy consumers have increasingly sought out imported dairy products.
Roy Manassen, the son of the company's founder, certainly seemed upbeat about the potential for Manassen in China and, he said, in Asia, too. "Our backyard has just grown significantly and we have the opportunity to make a major contribution into the most exciting region on the planet. I am very pleased to be part of it," he said.
Mr Manassen and other executives in the Australian company will keep a stake in the business and likely to be retained by Bright Food. Earlier this year, Wang told The Financial Times that he plans to keep the existing management teams of any companies Bright Food should, according to one industry consultant in China, help the company more effectively build its understanding of overseas markets.
"Acquiring a smaller brand in a more bounded market may make it easier to learn how to integrate a non-China based and owned-entity into the group, instead of going through that process with multi-category, multi-country business," Torsten Stocker, partner at management consulting firm Monitor Group's Shanghai office, tells just-food.
However, Stocker believes that, ultimately, Bright Food's ambitions reach beyond Asia-Pacific. He says the company wants to see a "significant increase in revenue". In 2009, Bright Food's turnover was CNY76bn, Stocker says and, by 2015, he claims the company wants sales of CNY110bn.
"From what I understand, they want to become a major food and beverage player globally, covering the full value chain, from basic resources to retail," Stocker says. "My sense is that they view themselves more as competing with a Nestle rather than with other Chinese players focusing on China only."
Manassen could be the latest in a line of acquisitions by the Shanghai-based, state-owned group. Bright Food's mettle has been tested by its failed pursuits of companies in Europe and the US but, by finding success close to home, they could find the ingredient to success further afield.
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