By Zhou Liming

While foreign investment has been pouring into China, Chinese investors have been tapping the water of overseas investment.
Chinese investment started flowing out in 1979, and by the end of 2002, Chinese capital had helped set up 6,960 overseas enterprises.
In the past two years, Chinese businesses have adopted mergers and acquisitions (M&As) on a global scale. Each of the projects involved millions or tens of millions of US dollars.
Current situation
For all the capital outflows, the amount is small considering the growth of China's economy or compared with that of the US, Japan or other developed countries. Also, the lack of expertise in launching businesses in foreign markets is apparent.
With the global gross transnational direct investment at US$653 billion in 2003, China's portion, estimated at an annual US$5 billion, was less than 1.25 per cent of the world's total.
By one estimate, only 35 per cent of Chinese businesses overseas end up making money.
But the Chinese Government is resolved to change that. There have been recent policy adjustments that were designed to help Chinese investors in their "go-out strategy". These include funds for foreign aid programmes and international market opening for small- and medium-sized enterprises.
At the Xiamen-based China International Fair for Investment and Trade (CIFIC), business organizations from various countries were brought together to discuss opportunities with Chinese investors in specially-arranged sessions. Market exploration trips were also organized, offering on-spot previews of market opportunities.
Forms of investment
The first type refers to investment in setting up either solely-funded subsidiaries or joint ventures, which has happened mostly in the fields of home electric appliances, electronics, and light and textile industries. For example, Haier, TCL and Gree now have offshore production lines.
The second type is M&A, which is a relatively-new phenomenon in China. Chinese investors put up money to buy off foreign equities for one of several reasons: (1) resources exploitation; (2) the extension of production and marketing prowess; (3) reverse contracted processing; and (4) the acquisition of technologies.
The third type of overseas investment takes the form of research and development (R&D). Huawei Technologies has opened eight regional R&D centers and 32 branches overseas.
The fourth is synergy from strategic alliances or acquisitions. When TCL merged with French TV maker Thompson, their combined annual sales of television sets rose to 18 million units, making them number one in the world with a 10 per cent market share.
Advantages
"Going-out" is easier said than done. One must be aware of one's own strengths and weaknesses before taking the jump.
In many industries, Chinese producers have a cost advantage. Labour cost is low and experience can be easily transplanted.
The vast homeland market can also prepare one for overseas expansion. The home appliance industry has withstood cutthroat competition in the domestic market and as a result found itself in a stronger position overseas.
The disadvantages include low technology input. By some estimate, about two thirds of large- or medium-sized State-owned enterprises do not have R&D departments and new products make up only 8 per cent of total sales.
Lack of proper management breeds inefficiency and waste, even corruption. Overseas staff usually enjoy special salaries and perks, causing jealousy among domestic colleagues and, when not properly supervised.
Strategies
Chinese companies need to see the world market as the centre stage and gain a foothold in the race towards global dominance.
To make that happen, some strategies should be considered and misconceptions clarified. For example, common sense dictates that manufacturing be located in low-cost countries. But this is not always the best choice. Places like the US may have high cost, but its labour productivity is much higher, too - by one count, 22 times higher that of China. Investors do not usually go to the cheapest place for production. They always weigh the cost and benefit in terms of productivity.
Transnational M&As can be better utilized for Chinese firms to set up a foreign presence on the run. Equity purchase and exchange sometimes are the most efficient way to get into a foreign market, with the benefit of branding and marketing channels realized instantly.
Strategic alliances are more difficult to manage in the long term than M&As, but their benefits can also be more enduring. When one joins hands with a suitable partner, be it a MNC or a university-lab, synergy is the most important factor. Market access and name recognition are also some of the strengths that foreign partners can share with a Chinese company.
If you are facing accusations of dumping or troubled by quota limits, or if you depend heavily on crucial product inputs from another country, it is high time you seriously considered going out and establishing your business presence outside China.

Dear Sir/Madam,

China International Fair for Investment & Trade (CIFIT), China's sole nationwide international investment and trade event, is held annually during September 8-11 in Xiamen.
CIFIT's seven successful sessions, thanks to major themes of "Introducing-FDI and Going-Global", have attracted the participation of numerous overseas and domestic governmental organizations, quasi-official organizations, and enterprises. The event has proved an effective platform for international investment promotion.
The 8th CIFIT will be held in Xiamen International Conference and Exhibition Centre from Sept. 8 to 11, 2004. To meet the growing demand from various countries expecting Chinese enterprises to invest overseas, the Ministry of Commerce of China will hold Going Global serial activities during the 8th CIFIT so as to enable foreign countries to showcase their investment environment, investment projects and market information, and to foster continued development of bilateral co-operation. We cordially invite you to participate in the 8th CIFIT's Going Global serial activities!
For more information about Going Global Serial Activities, please visit [www.chinafair.org.cn]
Suggestions for participation in Going Global Serial Activities
1. Please fill out the Reply Slip in the specified format. Stamp the slip and then mail or fax it, together with a valid copy of your Business Licence (for enterprises only), to the CIFIT Organizing Committee.
2. After receiving your Reply Slip and copy of Business Licence, the Organizing Committee will verify your participation qualifications. If your organization is qualified, a written qualification confirmation will be delivered to you.
3. Within 10 working days upon receipt of the Qualification Confirmation Letter, the exhibitor shall remit the full amount of the booth fee into an account designated by the Organizing Committee, and then fax the remittance receipt to the Organizing Committee. In addition, you are required to send your exhibition personnel's photos (max. 4 persons for each booth).
4. After receiving the booth fees from the exhibitor, the Organizing Committee will arrange exhibition booths in order of payment precedence and on the basis of exhibition categories, and then forward the Booth Confirmation Letter (Booth Number), Exhibitor's Guide and other relevant information to the exhibitor.
5. The exhibitor shall ship the exhibits and make relevant customs declarations as stipulated in the Exhibitor's Guide. The exhibitor shall, in accordance with the specified time and at the indicated location, carry the Booth Confirmation Letter and copy of remittance receipt to register with the Organizing Committee, which will provide a Booth Certificate and grant access to the exhibition pavilion in a specified period to fit out the booth.
Method of Payment
The exhibitor shall remit the full amount of the booth fee into the following account as designated by the Organizing Committee.
Name of Account Holder: China (Xiamen) International Investment Promotion Centre
Opening Bank: Bank of China, Xiamen Siming Subbranch
Bank Account No.: 43001124708091001
Contact Methods
Liaison Department of the Organizing Committee of CIFIT
Add: 10/F, Workers' Building, No. 47, Xinhua Road, Xiamen, 361003 China
Contact Person: Wang Yajuan, Cai Weihua, Huang Xuan
Tel: -86-592-2669826, 2669828, 2669829
Fax: -86-592-2669830
E-mail:
wendy@chinafair.org.cn