Sinogie Consulting Limited - Finding foreign investors

For most of the past decade, Sinogie’s operations have focused on helping clients do business in China. Much of this work has focused on foreign direct investment into China. However, as the world’s economic balance shifts, investment flows have changed, and so have our clients’ needs.

More and more foreign companies are now seeking investment from China, and Chinese investment overseas has shot up over the past few years.

In US Dollar terms, Chinese non-banking overseas investment increased more than tenfold between 2004 and 2008 – from US$ 5 billion to US$ 55 billion. Over the same period, Chinese non-banking investment in Australia increased fifteen times, from US$ 124 million to almost US$ 1.9 billion; 2010 could see Chinese investment in Australia at five to ten times this level.

China is one of the few countries to have successfully avoided recession during the Global Financial Crisis. While economies around the world contracted, China’s GDP grew by 9.6% in 2008 and an estimated 8.5% in 2009; it is expected to grow by 11.6% in 2010. In 2009, China accounted for over 50% of all global economic growth.

While investment from your home country can now be hard to come by, China offers a huge source of private and public funds: Chinese investors are among the few who are actively searching for investment opportunities around the world.

Not only do Chinese investors have funds: they are being actively encouraged to invest overseas. Over the past three years, the Chinese government has put in place a series of measures to push Chinese companies to invest around the world.

-	Chinese companies are being pushed to acquire foreign technology, foreign resources, foreign brand names, and access to foreign markets.
-	The Chinese Ministry of Commerce has streamlined the approval process for overseas investment.
-	China’s State-owned banks have been directed to provide soft loans and additional ancillary support to Chinese companies seeking to invest overseas.
-	The government has announced a series of grants, tax breaks, and other assistance for Chinese companies seeking to invest overseas

China’s investment plans and priorities

Interest in investing in overseas comes from State-owned, listed and privately-owned companies, as well as high-net-worth individuals (“HNWIs”). Each company has its own commercial or strategic reasons for wanting to invest overseas, but most benefit from the Chinese government’s “Go out” policy.

China’s government has set specific priorities for investment in particular countries. Some of the major target industries for Chinese investment worldwide include the following:

-	Energy, Mining, and mineral resources
-	Metal production and processing
-	Agriculture, fisheries and aquaculture
-	Food and beverage processing
-	High technology
-	Environmental-protection technologies
-	Tourism
-	Real estate

While these are the priority areas, investment in other areas will also receive government support.

As well as strategic considerations, many privately-owned companies have their own reasons for wanting to invest overseas: for example, many CEOs looking for a slower pace of life and a better place to bring up their children see investment in English-speaking countries such as Australia and the USA as an opportunity to move to these countries.

As well as being a source of finance, a Chinese investor can offer you increased access to the world’s fastest-growing market: their financial and strategic support can help you grow your business in China as well as at home.

Finding the right investor

China is clearly a very promising source of capital: Chinese companies are interested in both equity investment in and outright buyouts of foreign companies, and the government is keen to provide support.

However, Chinese companies are unfamiliar with the investment environment in many countries, and foreign companies rarely know much about doing business in China. This, combined with the language barrier, makes it extremely difficult for investors and investees to find each other.

When companies do find each other, the problems are rarely over. Foreign companies find it extremely difficult to understand the decision-making process at Chinese companies, and to identify and approach key decision makers. Both sides often have trouble understanding each other’s priorities.

The reputation of some Chinese companies has further muddied the picture: some Chinese companies have grown through corrupt and illegal deals and complex and questionable financial arrangements. Foreign companies looking to sell equity stakes could find themselves in an embarrassing position if the investor is arrested; even if the investor runs into financial trouble, this could make things difficult for the investee.

Sinogie can help you find the right investor

Finding the right investor, negotiating with the right people, and conducting successful negotiations can be extremely difficult. However, Sinogie can help.

For almost 15 years, Sinogie’s management has been dealing with cross-border investments and other deals between Chinese and foreign firms. Our corporate investigation and partner search services have given us the skills to find and vet the perfect partner, whether it’s an investor or an investee.

This, combined with our extensive experience in dealing with the Chinese government, gives us the knowledge base, access to resources, and personal skills required to:

-	Help you understand what you should be looking for in an investor.
-	Help you understand Chinese government policy towards your industry.
-	Find an investor who meets your requirements.
-	Check that the investor is genuinely interested, and is not just a tyre-kicker.
-	Identify and approach key decision-makers.
-	Conduct due diligence on the investor.
-	Assist you in negotiations with the investor.

Sinogie can help you tap into the China’s enormous financial resources, and can guide you through the complexities of doing business with Chinese companies.

Visit our new specialist website

Zhongao.com.au is Sinogie’s new website dedicated to helping Australian companies find Chinese investors. It provides information in English on how our services work, and provides information in Chinese on Australian companies searching for Chinese investment. To find out more, click here.

For more information on how Sinogie can help you find and evaluate Chinese investors,

please e-mail us, visit www.zhongao.com.au,

or call our Sydney sales office on

+61 2 8705 5435.