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Private Enterprises Are Global Investors

China Today by Liu Shaohua & Lei Gongming, December 20, 2016 Adjust font size:

The year 2016 marks the 15th year since China formally proposed the “Go Global” strategy. The country’s outbound investment is amid a transition as its focus switches from quantity to quality. In the process, more and more private businesses are becoming proactive global investors.

Private Giants Lead Investment Boom

Chinese enterprises are going global faster. Although state-owned enterprises (SOEs) have stepped up overseas mergers and acquisitions (M&As), private enterprises have surpassed SOEs in terms of transaction volume for the first time, two thirds of the 20 largest outbound M&As in the first half of 2016 having been private deals.

In 2015, 138 of the top 500 Chinese private enterprises achieved a total overseas revenue through outbound direct investment (ODI) and project contracting of US $164.154 billion, representing a 35.2 percent year-on-year growth. Private companies invested in 1,328 overseas projects in 2015, as compared with the 1,061 of the previous year, with total investment hitting US $28.863 billion.

Tencent Holdings Ltd. is to buy from SoftBank Group Corp. an 84.3 percent stake in Finnish mobile game maker Supercell, a deal worth around US $8.6 billion, according to The Wall Street Journal. The biggest acquisition so far in the global games market, Supercell has an estimated value exceeding US $10 billion.

Since 2006, Tencent has spent RMB 17.8 billion on the purchase of 34 game developers, seven of whom are Chinese enterprises, the others mainly from the U.S., South Korea, and Japan.

Chinese retail giant Suning Commerce Group announces on June 6, 2016 its signing of a deal to acquire a 70 percent stake in Italian soccer club Inter Milan.

The proportion of private enterprise investment in China’s total ODI has steadily risen in the past few years, Long Yongtu, chairman of the Center for China and Globalization (CCG), said. Private Chinese companies’ investments in the U.S. market in 2013 accounted for 76 percent of the total from China, and the projects in which they invested represented 90 percent by Chinese companies as a whole.

Chinese private enterprises are also proactive in emerging areas such as Virtual Reality (VR) and Augmented Reality (AR). Last February, Alibaba led the US $793.5 million funding for investment in the Florida-based Magic Leap. In the same month, Shanghai-based online games operator and book publisher Shanda Group announced its investment in The Void, a U.S.-based company that specializes in VR technologies. It also plans to establish in China a theme park dedicated to The Void. And on August 9, NetEase announced its participation in the funding of NextVR, an emerging leader in live virtual reality broadcast technology.

Since 2015, Chinese film and TV companies’ investments in the international arena have drawn world attention. After acquiring AMC Theaters, the Dalian Wanda Group embarked on a series of mergers and acquisitions through holdings or equity participation, so reaping profits from the international film market. Huayi Brothers Media Corp., China’s largest private film production company, has signed a deal with the U.S. STX Entertainment to finance, co-produce and release more than 18 films by 2017. The Shanghai-based China Media Capital (CMC) and Warner Brothers Entertainment, moreover, have formed a joint venture to produce Chinese-language movies for the international market.

Chinese enterprises’ preferred investment destinations are North America and Europe, due to their cutting-edge technology, advanced platforms and mature consumer groups.

Last June, China’s retail giant Suning Holdings Group acquired a 70 percent holding in Italian soccer club Inter Milan for € 270 million, (US $307 million) through the purchase of its existing and new shares.

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