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Strategies & Market Trends : China Warehouse- More Than Crockery -- Ignore unavailable to you. Want to Upgrade?

To: RealMuLan who wrote (3826)	12/9/2004 3:52:40 PM
From: RealMuLan	Read Replies (1) \| Respond to of 6370

Danger lurks in drive to go global John Berthelsen With its corporate coffers brimming and its offices teeming with confidence, China's companies are increasingly on a state-sanctioned hunt for overseas properties that is expected to roughly double outbound investment to US$14 billion (HK$109.2 billion) in 2005. Chinese foreign direct investment now exceeds US$35 billion, according to the United Nations Conference on Trade and Development, very much driven by a government determined to, in its words, go global. That drive was exemplified by Wednesday's news that Lenovo, the partly state-owned company, will purchase US computer giant IBM's personal computer division for US$1.75 billion, becoming the world's third-largest PC maker. But before exuberance becomes irrational in both privately and state-owned corporate offices in China, analysts said, it might pay to take a sober look at where this is going to take the country. ``You don't get your chequebook out for every pretty girl who comes to the door,'' a Shanghai-based research strategist said. ... This big push into the global marketplace was underscored in May when Zhang Zhigang, vice-minister of commerce, was quoted in the official newspaper People's Daily as saying China is ready to open further to the outside world and would increase its overseas investment, strengthening co-operation with overseas enterprises in resources, science and technology, labour and services. Then, in July, the country's ministries of Commerce and Foreign Affairs jointly issued a ``Catalogue of Foreign Countries and Industries Recommended for Investment'', a list of targeted industries in 67 countries and regions. To date, according to the semi-official China Today, more than 7,000 Chinese enterprises have invested in 160 countries and regions across the world. According to government news sources, China has over the last two to three years adopted policies to encourage overseas investment. Companies investing in resource development projects, for instance, are eligible for government-sponsored foreign exchange or low-interest yuan loans. China's ebullient government planners, however, might find it instructive to look at Japan's sobering experience with hubris in the 1980s and early 1990s. It was a period when Japan Inc, driven by a yen that had skyrocketed in value against the US dollar, snapped up some of America's most recognisable properties, stirring outraged complaints that Japan was buying the very sinews of the United States - a complaint that left many in America's boardrooms roaring with delight and gargling on their aged cognac and cigars. In fact, the Japanese lost money on just about everything they bought, from movie studios to Montana cattle ranches. There was Rockefeller Centre, the site of America's most famous Christmas tree. Some 80 per cent of Rockefeller Centre was purchased by Mitsubishi Real Estate in 1989. The company was forced to sell the property in 1995 when it was unable to meet the payments on its US$1.3 billion mortgage. There was the exclusive Pebble Beach Golf Course in Monterey, California, which Minor Isutani bought in 1990 for US$841 million, only to sell it in 1992 for a loss estimated at nearly US$350 million. There was the exclusive Bel-Air Hotel in Los Angeles, which was sold by the Rosewood Hotel Group to a Japanese financial outfit called Sazale Group for US$1.2 million - a room. Then there was Sony Corp, which poured US$6 billion into Columbia Pictures in 1989 along with Columbia's sister studio, Tri-Star Pictures, only to see the studio produce a long series of flops before Sony wrote down the studios to US$3.1 billion, taking a US$3.2 billion loss. The studios have struggled ever since, although Sony has stuck with the business. Now, analysts say, it could be China's turn - especially if Beijing were to capitulate to the blandishments of politicians across the globe and allow the yuan to float upwards. ... thestandard.com.hk