October 27,2009

SOEs Reaping Fine Overseas Investment Profits

By CSC staff, Shanghai

Despite the world-wide slowdown brought on by the financial crisis, China's state-owned enterprises (SOEs) have been raking in the cash from overseas M&A and investments. As of the end of 2008, among the 136 central enterprises supervised by the State-owned Assets Supervision and Administration Commission (SASAC), 117 were involved in foreign direct investment, 93 making profits, 21 taking losses, and the other three breaking even.

With China's stimulus policy and high domestic investment rates pushing the rapid expansion of production surpluses, overseas M&A has become an important strategy for China's enterprises to maintain sustained rapid development as well as gain technology, market, and other resources.

China's advantage in the capital has become increasingly evident. With access to huge foreign exchange reserves, high domestic savings, and cash-flush state-owned banks, SOEs can quickly get financing for rapid acquisitions in Africa, Latin America, Russia, Central Asia, Southeast Asian countries. They are also finding opportunities for overseas acquisitions and investment in the United States, Europe, and Australia. 

China hopes to develop and promote its multinational corporations through M&A, equity participation, public listing, and reorganization, and is actively encouraging enterprises to "go out" to establish their own global production systems, improve overseas investment promotion and protection systems, and strengthen coordination of overseas investment, risk management and supervision of state-owned assets abroad. 

The dismal global trade situation is also encouraging Chinese enterprises to invest abroad. Local protectionism and various technical trade barriers, import restrictions, discriminatory rules are plaguing China's export enterprises.

China is the world's third largest trading entity and the second largest export country. Over the first eight months this year, China has suffered 79 cases of "anti-dumping, countervailing, safeguard measures, and special safeguard measures" from 17 countries and regions, up 16.2% over the same period last year, involving $10.035 billion, up 121.2%, year-on-year. China has been #1 in anti-dumping investigations for the past 14 consecutive years and in countervailing investigations for 3 consecutive years.

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