Tue, Sep 27, 2005 - Page 10 News List

China not the juggernaut it is portrayed as: report


Corporate China is far from ready to take over the world as only a tiny minority of Chinese enterprises have active plans for acquisitions overseas, a research report said yesterday.

Out of 176 Chinese companies taking part in a recent survey, 91 percent said the domestic market would be their main target in the next three years, according to the report from the Economist Intelligence Unit (EIU).

"We were motivated to write this report by hypotheses, such as -- China is about to take over the world," Steven Xu, a director of advisory services at the EIU, told a briefing in Beijing.

"Based on our findings, we have come to the conclusion that Chinese companies' overseas expansion is still at a very early stage," Xu said.

China's overseas buying spree is often compared with Japan's aggressive foreign buying in the 1980s, with computer maker Lenovo's (聯想) US$1.75 billion acquisition of IBM's PC unit as one of the highest-profile recent examples.

Despite headline-grabbing stories like that, China's direct investment in other countries still remains below Japan's a generation ago.

Chinese companies that are venturing overseas either buy a brand -- as Lenovo did with IBM -- or seek to secure a steady supply of energy and raw materials, according to EIU.

Most companies told the EIU that competition from other Chinese companies remained the biggest challenge for the foreseeable future, according to the report, titled Domestic companies in China: Taking on the competition.

"The bulk of China's companies are small- and medium-sized, and they are for the most part not hunting for new brands and new markets overseas but are overwhelmingly inward-looking," the researcher said in a statement.

Fifty-five percent of companies in the survey said they considered China's large state-owned enterprises their main competition.

"It seems market liberalization in China has come rather too quickly for the majority of domestic enterprises which are under intense pressure to beat the competition in order to survive," said Xu.

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