China Inc.'s Ambitions
Could China buy a hefty chunk of Wal-Mart?
"Absolutely," says long-time investment banker Ronald Freeman, answering his own question. It is a vertical integrator's dream; if Wal-Mart were a country, it would be China's eighth-largest trading partner. Even in an age of rising American protectionism, he says, who could oppose significant foreign investment in the retailer on security grounds?
Mr. Freeman's notion is far more than academic even if it may not be in the offing. China's capability to make ever-more audacious deals is clearly expanding, and growing Western protectionism doesn't change that fact. What it may change, however, are China's tactics and timing.
THINKING GLOBAL
How should the U.S. respond to increasingly acquisitive Chinese companies?
Write to Frederick Kempe at
Thinkingglobal@wsj.com with your thoughts.
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Sign up to receive alerts when new installments of Thinking Global are published. Frederick Kempe also writes a daily analysis of the biggest news of the day. You may sign up to receive Mr. Kempe's full daily commentary by email, along with links to all of the stories and features that are mentioned in each day's Asian or European edition of the print Journal.Chinese advisers agree:
"At this stage of the game a hostile takeover of any kind really goes against the political wind," says Victor Chu, chief executive of mainland China's biggest direct investment company, First Eastern Investment Group. He is advising high-octane Chinese clients to "buy-in instead of buy-out," going for minority shares and partnerships instead of takeovers as the means of navigating the increasingly treacherous U.S. political minefield for direct investments.
Mr. Chu predicts strategic alliances and joint ventures will be the new flavor of the next 12-18 months, as it suits U.S. politics and this stage of Chinese corporate development. He says Chinese business leaders after a quarter century of economic reform "are still learning the rules of the game." And what they seek from foreign purchases -- secure resources, advanced technology, global brands and distribution channels -- "can be gained through partnerships, and, if the cooperation works well, one can increase the level of participation," he says.
Mr. Chu's buy-in idea comes at a critical time for U.S.-Chinese economic relations. Last week set a high-water mark for protectionist sentiment in the U.S., when Dubai Ports World retreated from plans to take control of six U.S. ports through its acquisition of a British ports operator. Yet Dubai is small beer to the U.S. economy compared to China, whose oil company Cnooc backed off acquiring California-based Unocal during a similar political storm last year.
An American Addiction
The irony is that America's newest expression of globalization fear, so-called investment protectionism, comes at a time when the U.S. needs foreign capital most and during a year that will set records for Chinese outward investments.
CHINA'S INVESTMENT WAVE
See a chart of the largest Chinese foreign-investment deals in the past two years.What most Americans are only beginning to realize is how addicted their country has become particularly to Asian investments to fund its record debts and keep interest rates low. The U.S. will need a trillion dollars of foreign capital in 2006, a year when China's foreign-reserve surplus will coincidentally cross the same threshold.
Whatever Washington's politics may be, the Chinese will look for investments that will bring them greater returns and a larger strategic stake than their current mountain of U.S. Treasury notes. They will be increasingly big players in the global market for corporate control, often bidding either for U.S. companies or against them for assets. Meanwhile, selling U.S. shareholders can redeploy their proceeds into higher-return investments in the U.S. and abroad.
China's Ministry of Commerce puts the total value of Chinese nonfinancial outward investments last year at $6.92 billion, up 26% from 2004, which itself saw 90% growth. Dealogic's tracking of all deals pegs last year's total at $8.84 billion.
The most prominent deals included Lenovo's $1.25 billion acquisition in 2004 of IBM's PC division, making it overnight the world's third-largest personal-computer manufacturer. TCL International's majority-owned joint venture with French company Thomson, which also won it the RCA brand, made TCL the world's largest TV manufacturer. Yet the biggest deals have been in resources, with Chinese companies buying interests from Africa to Latin America.
OUTWARD BOUND
Chinese Overseas Investment
Value in billion $ No. of deals
2001 1.49 36
2002 2.65 43
2003 1.50 41
2004 3.78 53
2005 8.84 50
2006* 2.43 13
*To date
Source: DealogicSeveral forces will drive a quantum leap in the quantity and prominence of such deals in the next couple of years.
First, China in January abolished the limits on foreign currency that Chinese companies are allowed to buy each year for off-shore investment. "This new policy will unleash a buying binge among cash-rich Chinese companies looking to expand abroad," says Friedrich Wu, a former official in Singapore's Ministry of Trade and Industry and now a visiting research fellow at the National University of Singapore.
Second, the State Assets Supervision Commission encouraged 169 state-owned enterprises to list on international stock markets before listing on domestic markets. Then last month the Ministry of Finance said China would embrace International Financial Reporting Standards that are used by some 100 countries including the European Union. Thus more and more Chinese companies will be going to foreign markets for the capital and equity that can finance acquisitions, and they will ready to meet the disclosure requirements in tenders for the shares of public companies.
Ironically, any Bush administration success in forcing Chinese leaders to revalue their currency also would increase China's buying power. One can debate the impact of a stronger yuan on trade, but what's beyond dispute is that Chinese companies overnight would have more dollars to spend on expansion.
What's ultimately driving all of these changes is China's ambition, even in the face of internal problems, to become a world power in every respect, ranging from military to corporate battlefields. The country is well on the way to its stated goal of increasing its share of Fortune's largest 500 global companies from 16 to 50 by 2010, even if protectionism grows.
And that's where Mr. Chu's buy-in strategy comes in.
China as Shrewder Shopper
Chinese corporate bosses will have to contain their egos, but Mr. Chu's more gradualist approach can be executed with less political resistance, smaller initial investments and arguably greater chance of long-term success than bolder moves. The Western partner, in turn, gets the quid-pro-quo of a Chinese partner who can help him "mitigate risk" in entering the tricky Chinese market with the proceeds of the share sale. Mr. Chu says a strategic alliance between Cnooc and Chevron would have avoided last year's failed grab for Unocal (which Chevron then acquired), while laying the groundwork for acquisitions by the Chinese company.
Mr. Chu believes the time will come when China makes a big splash in the U.S. market by buying a company of Wal-Mart's prominence, just not now. That said, at least one Chinese academic has studied the prospects of a Wal-Mart "buy-in."
Xiang Bing, dean of the Cheung Kong Graduate School of Business, wrote what he called a business plan for the purchase of an important minority share of Wal-Mart in a Chinese-language publication called "China Entrepreneur." He suggested an open-market purchase of a 10% stake for some $23 billion, which amounts to than 1 ? days of China's foreign-exchange earnings. "This is not very hard for China," he writes.
He argued the benefits would be significant for the world's largest retail manufacturer, China, to be inside the brain of the world's smartest retailer. China Inc. would tie itself in more tightly with Wal-Mart's global sourcing and distribution network, while avoiding public opposition. He said one must also also consider that historicallly Wal-Mart's stock returned more than U.S. Treasurys by a long shot. Mr. Xiang calls a Wal-Mart buy-in a "bold fantasy" that is "realistically feasible."
Perhaps this is the real moral of the story: a more fearful America won't make for a less ambitious China -- just a more resourceful one.
? How should the U.S. respond to increasingly acquisitive Chinese companies?
中国企业的雄心壮志
中国能买得起沃尔玛(Wal-Mart)吗？
“当然，”长期以来担任投资银行家的罗纳德?弗里曼(Ronald Freeman)自问自答道。这是一个垂直整合家的梦想；如果沃尔玛是一个国家，那它可是中国的第八大贸易伙伴。即便在美国贸易保护主义情绪日益升级的时代，他说，谁能够以安全问题为由反对大量外资入主沃尔玛呢？
弗里曼的观点远远超出了学术的意义，即便这种情况可能不会很快发生。中国展开更大手笔交易的能力显然日渐增强，而西方贸易保护主义的抬头不会改变这个事实。不过，可能改变的是，中国的策略和时机选择。
中国顾问对此表示赞同：
“到了游戏的这个阶段，任何形式的敌意收购都是逆政治风标而行，”中国大陆最大的直接投资公司第一东方投资集团(First Eastern Investment Group)的首席执行长诸立力(Victor Chu)说。他建议那些干劲十足的中国客户进行“买入、而不是买断”的交易，寻求少数股份和合作关系、而不是全盘收购，希望以此辗转穿越美国政界越来越变化莫测的直接投资雷区。
诸立力预计未来12至18个月内，战略联盟和合资企业将成为新潮流，因为它既顺应美国的政治形势，也符合中国企业发展的现状。他说，中国的企业领导人在经历了四分之一个世纪的经济改革后，“仍然在学习游戏规则。”他们想通过海外收购获得有保障的资源、先进的技术、全球化的品牌以及分销渠道，这些也“可以通过合作关系获得，如果合作进展顺利，还可以加大参与力度，”诸立力说。
诸立力的买入理念的提出正值美中经济关系处于关键时刻之际。上周美国的贸易保护主义气氛达到了顶点，迫使Dubai Ports World放弃了通过收购一家英国港口运营商控股六个美国港口的计划。而与中国相比，迪拜对美国经济的影响不足为道。去年，中国的中海石油(Cnooc)也因一场类似的风暴被迫退出了对加州联合石油(Unocal)的收购。
美国急需外资
具有讽刺意味的是，美国最近表现出的对全球化的顾虑，即所谓的投资保护主义恰逢美国最需外国资本、中国海外投资达到创纪录水平的一年。
大多数美国人才刚刚开始意识到，他们的国家是多么依赖于外资，尤其是亚洲投资，来弥补创纪录的债务并使利率维持在低水平。2006年，美国将需要1万亿美元的外资，而这一年，中国的外汇储备也将突破1万亿美元大关。
不论华盛顿的政治风向如何，中国人都会寻找能够给他们带来更高回报和更大战略性股权的投资，而不是像现在这样坐守一堆美国国债。他们将成为全球市场上越来越重要的公司股权争夺者，不是竞购美国公司，就是和美国公司角逐其他资产。与此同时，通过收购美国公司的股权，中国人可以重新部署收益，瞄准美国和海外回报更高的投资。
中国商务部(Ministry of Commerce)称，去年中国非金融类海外投资总额达到69.2亿美元，较2004年增长26%，2004年的增幅为90%。据Dealogic的资料显示，去年中国所有的海外投资交易总额为88.4亿美元。
最引人瞩目的交易包括2004年联想集团(Lenovo)斥资12.5亿美元收购IBM的个人电脑子公司，使联想集团一夜之间跃居为全球第三大个人电脑制造商。TCL国际(TCL International)与法国公司Thomson成立的合资企业使TCL成为世界最大的电视机制造商。TCL持有合资企业的多数股权，此次交易也使TCL赢得了RCA品牌。不过，最大手笔的交易一直在资源领域，中国企业不断收购从非洲到拉丁美洲的权益。
未来几年内，下面这几个因素将推动此类交易的数量和意义实现质的飞跃。
首先，今年1月份，中国取消了中国企业每年用于海外投资的购汇上限。“这条新政策将引发现金充裕的中国企业寻求海外扩张的收购热潮，”前新加坡贸易工业部(Ministry of Trade and Industry)官员Friedrich Wu说。Wu现为新加坡国立大学(National University of Singapore)的访问研究学者。
其次，国有资产监督管理委员会(State Assets Supervision Commission)鼓励169家国有企业在国内上市之前先在国际股市上市。上个月，中国财政部(Ministry of Finance)称，中国准备采纳包括欧盟(European Union)在内的100多个国家通用的国际财务报告准则(International Financial Reporting Standards)。这样，越来越多的中国企业将赶赴海外市场筹集资本和股权，为他们的收购融资。他们还准备满足竞购公开上市公司股份的信息披露要求。
具有讽刺意味的是，若布什(Bush)政府成功迫使中国领导人重估人民币汇率的话，那也会同时增强中国的购买力。你可以大谈人民币升值对贸易的影响，但题外话是，一夜之间，中国企业将拥有更多的美元来进行扩张。
所有这些变化背后的最终推动力是中国的凌云壮志，即便面临种种内部问题，中国仍有志在各个方面跻身于世界强国之列，从军事到企业，都是它的战场。眼下，中国正在稳步实施著它的既定目标──到2010年将财富全球500强企业中的中国企业数量从16家增加到50家，哪怕贸易保护主义甚嚣尘上。
诸立力倡导的买入战略也正是植根于此。
做精明的收购者
中国的企业老板将不得不稍稍收敛他们的远大抱负，但可以采纳诸立力的渐进主义方法，这样会遭遇较少的政治阻力。从小规模的投资开始，相比更大胆的行动，这样取得长期成功的可能性更高。反之，西方的合作伙伴将得到中国合作伙伴的帮助，帮助它在利用股权出售所得进入棘手的中国市场的过程中“分解风险”。诸立力表示，如果当初中海石油和雪佛龙(Chevron)达成战略联盟，那么中海石油就可以避免竞购加州联合石油失败的命运（加州联合石油后为雪佛龙所收购），同时为自己的最终收购奠定基础。
诸立力认为，总有一天，中国企业会收购一家像沃尔玛这么显要的美国公司，并在美国市场上掀起轩然大波，只不过不是现在。其实，至少有一位中国学者已经在研究参股沃尔玛的可能性了。
长江商学院(Cheung Kong Graduate School of Business)院长项兵曾在中文杂志《中国企业家》上撰写过一个他称之为收购沃尔玛重要少数股权的商业设想。他建议通过公开市场，斥资大约230亿美元收购沃尔玛10%的股权，这笔钱相当于中国一天半的外汇储备。“并不是很难，”他写道。
项兵认为，成为全球最精明的零售商沃尔玛的股东，对于全球最大的零售商品制造商──中国而言，好处是巨大的。中国企业将更加紧密地融入沃尔玛的全球采购和分销网络，同时避免公开的冲突。他说，还有一点值得考虑，历史上从长期来看，沃尔玛的资产回报率远远高于同期美国国债的投资收益率。项兵称，“买下沃尔玛”是一个“大胆的设想”，有著“比较现实的可行性。”
也许这才是整个构想的真正寓意：美国人的重重顾虑并不会动摇中国人的雄心壮志──只会让他们变得更加足智多谋。
