China offers lucrative opportunities for foreign companies looking to take over local firms, but Beijing needs to open up further if it is to attract much-needed investment, experts said yesterday.
"The opportunities are enormous," said Kenneth Davies, senior economist at the Organization for Economic Cooperation and Development (OECD).
"But the opportunities can only really materialize if there are changes in the institutional framework," he told a seminar on investing in China.
Davies said northeast China, for example, had lots of state-owned, inefficient industrial companies.
"They have a lot of capital. They employ a lot of people. They're often making things that nobody wants to buy, using technology that is outdated," he said.
The firms had some very able workers but often the management was less proficient and their balance sheets mired in debt.
"I was given a bundle of 100 sheets of paper in Changchun by the local government," he said. "They said,`Help. Please find some foreign investors to bring us new technology, new management methods.' And they didn't say `to pay off the bank debts,' but that was pretty obvious."
The OECD has called on Bei-jing to make the rules and regulations for cross-border mergers and acquisitions (M&A) more open and transparent to attract more and better foreign investment.
"China can benefit from more open policies on M&A. We're encouraging a much more open approach," Davies said.
China was gradually become friendlier to foreign direct investment but firms should not expected sweeping changes overnight, the forum heard.
"China is a country that is gradually being opened up to the world," said Akira Furuya, who heads a China research institute within the Japanese trading house Itochu Corp.
"All-at-once opening up will not be suitable for China because China is too big," he said.
"Transparency is key [for foreign investors]. However, transparency is lacking in China. We do not know what is happening in Chinese companies," he said.
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