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“Malicious Foreign Investors” Could Use Some PR…and a Beer

There has been more talk of the threat of “malicious foreign investment” and foreign monopolies. The FT reports that companies in the spotlight include Citigroup, Merrill Lynch, UBS and JP Morgan, Microsoft, Kodak and Tetrapak, Carlyle, and now Caterpillar.

Caterpillar’s takeover of a state-owned machinery company in Xiamen has hit problems because of arguments over control. Carlyle’s takeover Xugong, a leading construction machinery maker in Jiangsu, has also been suffering from local pressure – not least because of its high profile, as it is would be the largest takeover by a private equity firm in China to date.

One hand of the Chinese government is keen to attract foreign technology, capital and management, but the other is facing pressure to protect domestic industries, even some that are in fatal decline. Foreign investors need to be sensitive to this issue – as in the case of SABMiller, which is on the M&A trail in China. Asia MD, Andre Parker, is quoted in the South China Morning Post as saying:

A sensible strategy for the times! Of course, the company (which lost out to Anheuser-Busch in the battle for Harbin Brewery in 2004) already has a 49 percent joint venture with China Resources Breweries making Snow beer (the number 2 brand, with 14 percent market share), and is aiming for double-digit sales growth…

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