Chinese firms 'play fair' in global deals

While politics has scuttled acquisitions in sensitive sectors, investment bank boss says companies are putting honest objectives on the table

PUBLISHED : Tuesday, 24 September, 2013, 12:00am
UPDATED : Tuesday, 24 September, 2013, 11:27am

Mainland firms have honest objectives in their efforts to acquire overseas assets, the head of one of China's biggest investment banks said yesterday, but political suspicions remain the biggest barrier to getting deals done.

Those tensions could be reduced as mainland companies explore a wider range of acquisition targets, moving away from natural resources and into less sensitive areas, researchers say, and that could fuel a flow of deals tipped to make the mainland the world's biggest outbound foreign direct investor by 2017.

The major concern facing mainland state-owned enterprises seeking to invest in the energy and resources sectors overseas was speculation they were committed to the political objectives of the central government, China International Capital Corp chairman Jin Liqun said yesterday at a forum in Beijing.

"When China wants to invest overseas in oil and gas, do we have no political objectives? Of course we have, because we want to have safe, guaranteed supply of energy," said Jin, who was formerly head of the supervisory board of China Investment Corp, the mainland's sovereign wealth fund.

But he said: "It's on the table. Don't worry about that. Our deal is fair, because it's of mutual benefit. These are honest objectives. We do everything under the law, of your country and mine."

Several mainland firms have encountered setbacks when seeking to invest in developed nations, such as the United States, due to national security concerns.

China National Offshore Oil Corp saw its planned purchase of Unocal rejected by US regulators in 2005 and telecommunications equipment maker Huawei Technologies was forced to abandon its plan to buy the assets of US company 3Leaf Systems in 2011. However, top pork producer Smithfield Foods won national security clearance this month for its proposed US$4.7 billion sale to mainland meat processor Shuanghui International - a deal that would rank as the biggest purchase of a US company by a Chinese firm.

Mainland companies' overseas direct investment has boomed in recent years, thanks in part to support from Beijing, which wants to diversify the country's huge foreign-exchange reserves, and also due to opportunities brought by the global financial turmoil that has dampened overseas markets.

While global foreign direct investment fell 17 per cent last year, the mainland became the world's third-largest investor after the US and Japan, with outbound direct investment surging 17.6 per cent to a record US$87.8 billion, mainland data shows.