Summit Notebook

First, be confident

By George Chen
September 2, 2009

As China Inc shops for assets almost everywhere across the planet, some people know what they want. Others are just hurrying to grab some company that’s become undervalued during the global financial crisis.
 
At the Reuters China Investment Summit in Hong Kong, we asked one of JPMorgan’s top deal advisers — Brian Gu, head of M&A for Greater China — if he had any suggestions for cash-rich Chinese. His answer was simple: First, be confident.
 
    “For any M&A, they need the confidence that they aren’t getting into anything that’s messy. They have to demonstrate strong integration and a capability to absorb those assets,” said Gu, a biochemist-turned investment banker.
 
    “A lot of companies want to make minority investments because they just don’t have the confidence to handle a full-blown integration.” Instead, he said, companies are taking a phased approach — buy 20 percent, send some representatives to get to know the managers and then make the decision later on whether to buy the whole company.
 
    In fact, not many Chinese overseas acquirers have shown much confidence, including Lenovo — whose chairman once said that it may take years to see whether the purchase of IBM’s PC business would succeed — and China Minsheng Banking Corp. Minsheng bought a minority stake in UCBH and the shares of the American company sank during the financial crisis.
 
    Gu was unenthusiastic about Chinese companies buying into distressed assets. “With distressed transactions, it’s easier to see them buying into simpler assets, such as natural resources or large capital equipment assets”, he said, adding he believes China Inc knows how to value and operate natural resources better than other, more complicated businesses.
 
    “(Chinese companies) don’t have to be involved in turning around a distressed company. That’s why you see a lot of action in those sectors rather than making bold moves where you buy big operations that involve hundreds of thousands of employees.”
 
    Just months ago, a little-known Chinese company called Tengzhong surprised markets with its plan to buy GM’s troubled Hummer unit. The deal is now still subject to final agreement between Tengzhong and GM as well as Beijing’s approval.
 
    Now, the question for Tengzhong — is it confident it can succeed with Hummer where GM has already failed?

IBM skips around China Internet censorship

September 2, 2009

Foreign companies in China, which has the world’s biggest online community, have faced allegations of bowing to censorship rules in their hunt for market access. To be careful, they usually avoid questions on the subject altogether or deflect them with humour.

China resource deals still hot

September 1, 2009

Investment bankers have been saying that there are only two
things you need to know when it comes to Asia M&As — China and
resources.

Lenovo’s next big thing?

September 1, 2009

Electronics is a tough business, with most manufacturers
working tirelessly on what they hope will be the next big thing,
even as they survive on razor thin profit margins.

from LEGACY Reuters Summits:

Lessons from children, old ladies

September 1, 2009

China's banking system could take a cue from children and
neighborhood social groups to strengthen lending rules and
ensure that credit flows to where it is needed most.

from Changing China:

Look in the mirror

August 31, 2009

The U.S. rejection of the $18.5 billion bid by China's top offshore oil company, CNOOC Ltd, for  Unocal in 2005 was not a move worthy of a world power such as the United States, asserts a Chinese academic with the government's top economic planning agency.

from Changing China:

Interest rate barometer

August 31, 2009

Chinese banking regulators should monitor more closely the lending activities of underground banks, where interest rates react more quickly to changing economic conditions than do rigid state-set interest rates.

from Changing China:

Don’t bank on mortgage spike

August 31, 2009

By Michael Wei

Don't count on a recent spike in home loans to greatly improve earnings at Chinese banks. That's because they are still a relatively small part of overall lending.

from Changing China:

Where others won’t go

August 31, 2009

Chinese mining companies are expanding overseas because they are cost-effective and willing to work in dangerous and risky areas where others are unwilling to go, Yang Junmin, vice general
manager of Beijing Sinodrill, asserted at the Reuters China Investment Summit.

China’s evolving role from producer to consumer

August 31, 2009

Hardly a day goes by now without some Chinese firm striking a deal to buy assets overseas, but the country’s best prospects for growth may be right in its own backyard. Vivi Lin in Beijing reports on how the world’s workshop is fast becoming one of the world’s top consumers.