http://ftalphaville.ft.com/blog/2007/07/09/5757/relative-values-private-equity-vs-hedge-funds/
Relative values: private equity vs hedge funds
Hedge funds and private equity have one big thing in common, says Lex. Both charge whopping fees — typically 2 per cent of assets under management and 20 per cent of investment profits. Otherwise, the differences are huge.
So which of the two asset classes is more valuable when a management company goes public? The obvious answer, according to Lex, is private equity:
First, its assets are tied up long-term. KKR, which plans an IPO, says 73 per cent of its assets are committed for as much as 18 years. While KKR is highly unlikely to hold any investment for that long, it does give huge flexibility to ride out tough times. And it provides a steady stream of cash from the 2 per cent management fee — alongside the bigger and more volatile 20 per cent share of investment gains.
Private equity funds can also juice fees with a charge for each deal and sometimes a cut for syndicating equity to third-party investors, which can take underlying management fees closer to 3 per cent, Lex notes.
By contrast, hedge fund investors can pull their money quickly if performance is bad, making the underlying fee stream less secure. In addition, poor investment returns can quickly inflict a double whammy on a hedge fund manager’s earnings — of weak performance fees and falling AUM as investors withdraw money.
Second, there is image. Private equity firms “feel more solid”, notes Lex:
They have established brands such as Blackstone and KKR, they buy full control of businesses people know, and buy-outs have largely avoided financial trouble in recent years. Hedge funds, for some, conjure up images of whizz-kids rolling the dice on behalf of clients, leading to high-profile blow-ups such as Amaranth and recently some mortgage funds at Bear Stearns.
Finally, private equity firms have a “cookie jar” of unrealised gains on their illiquid investments that should emerge as cash flow when the businesses are sold. (At least, that is the case in today’s strong market.)
But … dig a little deeper and hedge funds also have their charms.
They mostly lack the protection of long lock-ups. But in good times their AUM grows naturally because, unlike private equity, they do not constantly hand cash back to investors when they exit investments.
In the end though, both models live and die by their returns.
Fortress and Blackstone have a mix of other assets alongside their straight private equity funds. The coming IPOs of Och-Ziff, a pure hedge fund, and KKR, a fairly pure private equity manager, should give a clearer idea of relative valuations. Assuming hedge funds do not lengthen lock-ups significantly, “private equity should usually command a higher multiple”, says Lex.
However, investors also need to take cycles into account, it cautions:
The easy credit conditions that have fuelled the private equity boom are showing signs of strain and stocks are well into a long bull market. The flexibility of hedge funds to go short and mix up the assets they invest in might make the most blue chip managers look attractive in tougher times.
This entry was posted by Gwen Robinson on Monday, July 9th, 2007 at 10:38 and is filed under Capital markets, Private equity, Hedge funds. Tagged with blackstone, fortress, kkr, och-ziff. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.
Sunday, September 21, 2008
Friday, September 19, 2008
CITIC to buy into Morgan Stanley?
From today's SCMP
Citic considers buying stake in Morgan Stanley
CIC mulls raising holding in US firm
Tim LeeMaster
Updated on Sep 19, 2008
State-owned Citic Group is reportedly considering buying a stake in Morgan Stanley as the United States investment bank seeks new capital amid the deepening financial crisis.
China Investment Corp, the mainland's sovereign wealth fund, meanwhile, is mulling raising its stake in Morgan Stanley despite Beijing's reluctance to approve overseas financial sector acquisitions.
CNBC yesterday reported that Citic was in talks with Morgan Stanley while the Financial Times reported that CIC, which already has a 9.9 per cent stake in the Wall Street firm, wanted to lift its holdings.
Citic and Morgan Stanley officials were unavailable for comment.
The troubled US financial industry has been increasingly seeking deep-pocketed Asian investors to bail it out of a crisis that has been compared with the Depression in its severity.
Citic is an investment holding company and has financial subsidiaries including the mainland's largest investment bank, Citic Securities, and the seventh-largest lender, China Citic Bank Corp.
CIC manages US$200 billion of the mainland's foreign exchange reserves.
Various media outlets have reported that Morgan Stanley is also in talks with Wachovia Corp, Citigroup and HSBC Holdings.
Morgan Stanley's shares have plunged 42 per cent in the first three trading days of this week as the crisis gripping some of the world's largest financial firms worsens.
Lehman Brothers Holdings, formerly the fourth-largest investment bank in the US, filed for bankruptcy on Monday before selling its US operations to Barclays, the third-largest British bank, for a comparative bargain.
Merrill Lynch did better with a sale, at a 70 per cent premium to its share price, to Bank of America Corp but lost its independence as a company.
The US government on Tuesday took over American International Group, the country's largest insurer.
Mainland regulators have been blocking bank acquisitions overseas this year as financial stocks continued to spiral downwards, making previous investments look like poor decisions.
China Development Bank, a policy bank trying to transform into a more commercially focused lender, was blocked in January from pumping US$2 billion into Citi, at that time the largest US financial institution.
Citic Securities was slowed in its attempted acquisition of Bear Stearns by regulatory foot-dragging, a move that turned prescient in March when Bear Stearns collapsed and was bought by JP Morgan.
"Bear Stearns was a lucky miss for them but Morgan Stanley is a more substantial operation and in a healthier state at this moment," said Warren Blight, a banking analyst at Foxx-Pitt Kelton.
"Given that [Citic] does have China's largest investment bank you can see some alignment there."
Still, other market observers said the prospect of a major move by mainland companies into the international finance sector was dim.
"In view of the global financial turmoil, Chinese financial institutions are likely to adopt a more cautious approach towards overseas investments," said Jing Ulrich, JP Morgan's chairman of China equities.
CIC acquired 9.9 per cent stakes in both Morgan Stanley and US private equity firm Blackstone Group last year.
Shares of Morgan Stanley are down 59.05 per cent this year to Wednesday while Blackstone's have fallen 32.22 per cent.
Meanwhile, Barclays yesterday said that it would raise US$1.36 billion from the sale of new shares to help fund its takeover of Lehman's US operations.
China Development Bank was forced to subscribe to a share placement in July to maintain its 3 per cent stake in the bank.
Citic considers buying stake in Morgan Stanley
CIC mulls raising holding in US firm
Tim LeeMaster
Updated on Sep 19, 2008
State-owned Citic Group is reportedly considering buying a stake in Morgan Stanley as the United States investment bank seeks new capital amid the deepening financial crisis.
China Investment Corp, the mainland's sovereign wealth fund, meanwhile, is mulling raising its stake in Morgan Stanley despite Beijing's reluctance to approve overseas financial sector acquisitions.
CNBC yesterday reported that Citic was in talks with Morgan Stanley while the Financial Times reported that CIC, which already has a 9.9 per cent stake in the Wall Street firm, wanted to lift its holdings.
Citic and Morgan Stanley officials were unavailable for comment.
The troubled US financial industry has been increasingly seeking deep-pocketed Asian investors to bail it out of a crisis that has been compared with the Depression in its severity.
Citic is an investment holding company and has financial subsidiaries including the mainland's largest investment bank, Citic Securities, and the seventh-largest lender, China Citic Bank Corp.
CIC manages US$200 billion of the mainland's foreign exchange reserves.
Various media outlets have reported that Morgan Stanley is also in talks with Wachovia Corp, Citigroup and HSBC Holdings.
Morgan Stanley's shares have plunged 42 per cent in the first three trading days of this week as the crisis gripping some of the world's largest financial firms worsens.
Lehman Brothers Holdings, formerly the fourth-largest investment bank in the US, filed for bankruptcy on Monday before selling its US operations to Barclays, the third-largest British bank, for a comparative bargain.
Merrill Lynch did better with a sale, at a 70 per cent premium to its share price, to Bank of America Corp but lost its independence as a company.
The US government on Tuesday took over American International Group, the country's largest insurer.
Mainland regulators have been blocking bank acquisitions overseas this year as financial stocks continued to spiral downwards, making previous investments look like poor decisions.
China Development Bank, a policy bank trying to transform into a more commercially focused lender, was blocked in January from pumping US$2 billion into Citi, at that time the largest US financial institution.
Citic Securities was slowed in its attempted acquisition of Bear Stearns by regulatory foot-dragging, a move that turned prescient in March when Bear Stearns collapsed and was bought by JP Morgan.
"Bear Stearns was a lucky miss for them but Morgan Stanley is a more substantial operation and in a healthier state at this moment," said Warren Blight, a banking analyst at Foxx-Pitt Kelton.
"Given that [Citic] does have China's largest investment bank you can see some alignment there."
Still, other market observers said the prospect of a major move by mainland companies into the international finance sector was dim.
"In view of the global financial turmoil, Chinese financial institutions are likely to adopt a more cautious approach towards overseas investments," said Jing Ulrich, JP Morgan's chairman of China equities.
CIC acquired 9.9 per cent stakes in both Morgan Stanley and US private equity firm Blackstone Group last year.
Shares of Morgan Stanley are down 59.05 per cent this year to Wednesday while Blackstone's have fallen 32.22 per cent.
Meanwhile, Barclays yesterday said that it would raise US$1.36 billion from the sale of new shares to help fund its takeover of Lehman's US operations.
China Development Bank was forced to subscribe to a share placement in July to maintain its 3 per cent stake in the bank.
Attracting Chinese investment getting tougher
Good article from Time about CIC.
Why China Won't Come to the Rescue
By Bill Powell / Shanghai
If once burned twice shy isn't an old Chinese proverb, it probably should be. As Gao Xiqing, the chief investment officer of China's $200 billion sovereign wealth fund, meets in New York this week with Morgan Stanley's CEO John Mack to discuss increasing the Chinese government's stake in the venerable — and flailing — investment bank, he bears an obvious burden. Last December, the CIC (the China Investment Corp.) invested $5 billion for a 9.9% stake in Morgan Stanley (for which the bank must pay CIC a 9% annual dividend until 2010.) On paper, that investment is now down more than 25%. Worse, Beijing paid $3 billion for a piece of the Blackstone Group just ahead of the private equity firm's initial public offering last June — an investment that occurred about a nano-second before the so-called sub-prime crisis began annihilating value on Wall Street and beyond. Fairly or not, the Blackstone stake has since become the symbol in China of a naive bunch of foreigners getting hooped by Wall Street sharpies. It's been the subject of withering public scorn in China, and has drawn pointed private criticism from the highest levels of the communist party, banking sources in Beijing and Hong Kong have said. The message: never again. All of which makes CIC's critics in China wonder why Gao, a soft-spoken graduate of Duke University's law school (class of '86), bothered to get on the plane.
The answer, if the recent behavior of other sovereign wealth funds and foreign private equity houses is any indication, may be to deliver, in person, a simple message: no. Not again, not unless you structure a deal in such a way that we simply cannot lose. If not, good-bye. That, in effect, is what Sameer Al Ansari, the CEO of Dubai International Capital, told Wall Street earlier this summer. He had had discussions "with all the people you'd expect" in the pantheon of U.S. finance about a possible investment from his fund, he told TIME. Wisely, it turns out, he told all of them no — and then set about on a tour of China to look at direct investments in companies that produce something other than toxic collateralized debt obligations. "There are a lot of other compelling places to look for investments these days," he said.
The decision not to invest a couple of months ago looks pretty smart today, and it's not clear, despite this week's carnage on Wall Street, that anything has changed significantly. To the extent that sovereign wealth funds are talking to desperate for capital bankers in the U.S. — and, as Gao's trip shows, they are talking — the terms of the discussions, one senior Hong Kong based banker said today, are likely to be very harsh for any potential recipient of capital: "You're basically looking at structuring a deal at this point in which there is no downside — none. Even if a company goes under, like Lehman, you're first in line to get paid a return on your assets. Take it or leave it."
That's more or less the deal secured by Temasek, a sovereign wealth fund in Singapore, when it invested in Merrill Lynch. It dumped $4.4 billion into Merrill last December at $48 per share, but a downside protection clause meant that the firm would make money even if the stock plunged to $24. It did — and then some. By late last week, Merrill traded at just over $17 a share, increasing the pressure on CEO John Thain to do a deal. Over the weekend, he sold the firm to Bank of America in an all-stock transaction worth about $29 per share for Merrill shareholders-which means Temasek could walk away with about a 20% return should it sell it shares. The Temasek deal last December, banking sources say, taught everyone in the region a lesson: if you're talking to Wall Street, drive as hard a bargain as you possibly can-or walk. They need you much more than you need them.
Now, moreover, even if valuations in the U.S. financial sector get more appealing should the market rout intensifies, there's another factor in play: governments in east Asia and the Gulf want their funds to help domestic companies, not foreigners. On Thursday, for example, Beijing's CIC announced that it would make investments in three of China's biggest commercial banks — Industrial and Commercial Bank of China, Bank of China and China Construction Bank — that themselves are getting hurt by an economic slowdown and a real estate slump at home. "This is a significant policy initiative aimed at supporting China's leading financial institutions at a time of global turmoil," says Jing Ulrich, Chairman of China Securities at JP Morgan in Hong Kong. It's another way of saying to CIC's Gao Xiqing, if you come home from New York having increased our stake in Morgan Stanley, it had better be the sweetest deal anyone in Beijing has ever seen.
Why China Won't Come to the Rescue
By Bill Powell / Shanghai
If once burned twice shy isn't an old Chinese proverb, it probably should be. As Gao Xiqing, the chief investment officer of China's $200 billion sovereign wealth fund, meets in New York this week with Morgan Stanley's CEO John Mack to discuss increasing the Chinese government's stake in the venerable — and flailing — investment bank, he bears an obvious burden. Last December, the CIC (the China Investment Corp.) invested $5 billion for a 9.9% stake in Morgan Stanley (for which the bank must pay CIC a 9% annual dividend until 2010.) On paper, that investment is now down more than 25%. Worse, Beijing paid $3 billion for a piece of the Blackstone Group just ahead of the private equity firm's initial public offering last June — an investment that occurred about a nano-second before the so-called sub-prime crisis began annihilating value on Wall Street and beyond. Fairly or not, the Blackstone stake has since become the symbol in China of a naive bunch of foreigners getting hooped by Wall Street sharpies. It's been the subject of withering public scorn in China, and has drawn pointed private criticism from the highest levels of the communist party, banking sources in Beijing and Hong Kong have said. The message: never again. All of which makes CIC's critics in China wonder why Gao, a soft-spoken graduate of Duke University's law school (class of '86), bothered to get on the plane.
The answer, if the recent behavior of other sovereign wealth funds and foreign private equity houses is any indication, may be to deliver, in person, a simple message: no. Not again, not unless you structure a deal in such a way that we simply cannot lose. If not, good-bye. That, in effect, is what Sameer Al Ansari, the CEO of Dubai International Capital, told Wall Street earlier this summer. He had had discussions "with all the people you'd expect" in the pantheon of U.S. finance about a possible investment from his fund, he told TIME. Wisely, it turns out, he told all of them no — and then set about on a tour of China to look at direct investments in companies that produce something other than toxic collateralized debt obligations. "There are a lot of other compelling places to look for investments these days," he said.
The decision not to invest a couple of months ago looks pretty smart today, and it's not clear, despite this week's carnage on Wall Street, that anything has changed significantly. To the extent that sovereign wealth funds are talking to desperate for capital bankers in the U.S. — and, as Gao's trip shows, they are talking — the terms of the discussions, one senior Hong Kong based banker said today, are likely to be very harsh for any potential recipient of capital: "You're basically looking at structuring a deal at this point in which there is no downside — none. Even if a company goes under, like Lehman, you're first in line to get paid a return on your assets. Take it or leave it."
That's more or less the deal secured by Temasek, a sovereign wealth fund in Singapore, when it invested in Merrill Lynch. It dumped $4.4 billion into Merrill last December at $48 per share, but a downside protection clause meant that the firm would make money even if the stock plunged to $24. It did — and then some. By late last week, Merrill traded at just over $17 a share, increasing the pressure on CEO John Thain to do a deal. Over the weekend, he sold the firm to Bank of America in an all-stock transaction worth about $29 per share for Merrill shareholders-which means Temasek could walk away with about a 20% return should it sell it shares. The Temasek deal last December, banking sources say, taught everyone in the region a lesson: if you're talking to Wall Street, drive as hard a bargain as you possibly can-or walk. They need you much more than you need them.
Now, moreover, even if valuations in the U.S. financial sector get more appealing should the market rout intensifies, there's another factor in play: governments in east Asia and the Gulf want their funds to help domestic companies, not foreigners. On Thursday, for example, Beijing's CIC announced that it would make investments in three of China's biggest commercial banks — Industrial and Commercial Bank of China, Bank of China and China Construction Bank — that themselves are getting hurt by an economic slowdown and a real estate slump at home. "This is a significant policy initiative aimed at supporting China's leading financial institutions at a time of global turmoil," says Jing Ulrich, Chairman of China Securities at JP Morgan in Hong Kong. It's another way of saying to CIC's Gao Xiqing, if you come home from New York having increased our stake in Morgan Stanley, it had better be the sweetest deal anyone in Beijing has ever seen.
Monday, September 8, 2008
Latest VC stats
As reported by Dow Jones VentureSource, aggregate venture investment in the U.S. during the quarter was $6.9 billion in 622 transactions, compared to $7.4 billion invested in 657 transactions in the first quarter of 2008. Acquisitions of venture-backed companies in the second quarter decreased noticeably, with 56 transactions totaling $4.7 billion, compared to 86 transactions totaling $11.3 billion in the first quarter.
China FDI update
http://www.usatoday.com/money/world/2008-03-16-chinarising_N.htm
China's private firms set sights on rest of world
By Justin Pritchard, Associated Press
Amid the torrent of clothes, electronics and toys surging out of China comes a little-noticed export: international companies.
For centuries, individual Chinese have sought their fortunes abroad, creating Chinatowns around their restaurants and shops. Now, Chinese firms are going global, pushed by a government embracing capitalism, pulled by untapped markets and armed with bundles of money from a thriving economy back home.
Auto plants are popping up in Latin America. A sprawling commodity bazaar promises a provincial Swedish city new life. A car parts distributor is snapping up ailing companies in the U.S. Rust Belt, a TV factory hums in South Africa and a high-tech firm is landing contracts to revamp the Persian Gulf's telecommunication networks.
Just as the earlier arrival of Japanese companies changed U.S. manufacturing, over time Chinese companies could affect how their Western rivals approach innovation, competition and business itself.
"We not only consider ourselves pioneers," says Sean Chen, who at 26 is overseeing the construction of a $100 million electrical parts plant and industrial park in the American South. "We also consider ourselves explorers."
Chen and his fiancee, Joy Chen — both took American first names — moved from Shanghai to Atlanta to set up shop for General Protecht Group Inc., a company controlled by his father. While the goal is profits, Sean Chen and his father view the venture almost as a social experiment — its aim, he said through an interpreter, is to marry the best Chinese and American work practices.
"I want to have the efficiency and execution normally shown by the American employees and the brotherhood that a Chinese company normally shows," Sean Chen says. "There are capitalists and there are socialists and I want to see whether they can get along."
The Chinese corporate presence is still small overseas, but it's growing fast:
• Chinese companies invested more than $30 billion in foreign firms from 1996 to 2005, nearly one-third in 2004-05 alone, according to an analysis by Usha Haley, a professor of international business at the University of New Haven. Computer maker Lenovo Group helped launch the frenzy in December 2004 by announcing it would acquire IBM Corp.'s personal computer unit for $1.75 billion.
• In the United States and Canada, Chinese firms now have about 3,500 investment projects, compared to 1,500 five years ago, according to an estimate by Maryville University professor Ping Deng. Large state-owned companies jumped ahead; medium and small private firms are catching up.
• Total investment in the U.S. is between $4 billion and $7 billion, Ping estimates. In Europe, Chinese acquisitions last year alone totaled $563.3 million, according to research company Dealogic.
• Last year, 29 Chinese firms debuted on U.S. stock exchanges, just two shy of the total for the previous three years combined, according to the Bank of New York Mellon Corp.
• The number of U.S. visas issued to Chinese executives and managers who transfer to U.S. posts within their companies nearly doubled to 2,043 between fiscal years 2004 and 2007. The current fiscal year is on pace to top that, U.S. State Department statistics show.
Chinese businesses are not just establishing offices and factories overseas. They also are developing and selling products under their own brands, rather than simply supplying Western firms in search of cheap manufacturing.
The competition may make it harder for American and European firms to milk early profits from cutting-edge products before reducing prices and releasing them to the mass market. Vulnerable sectors include high-definition TVs, portable DVD players, medical technology, and perhaps even cars, according to Peter Williamson, a professor of international management at the University of Cambridge with extensive China experience.
At the Detroit Auto Show in January, one midsized SUV from China with goodies including a leather interior was priced at just $14,000 — less than half what many comparable cars cost. Models could be available by early next year in nine states.
Chinese firms can use their low-cost manufacturing advantage to pile on additional features. And they can do that by copying taste-making Western firms, circumventing the expense of product development. If the quality is high enough, the strategy can be devastating.
"It will pull to pieces the profit models of their competitors," Williamson says. "It's a classic case of attacking your competitor where you know they're reluctant to respond, because it's very costly."
The dynamic recalls how Japanese automakers forced their U.S. competitors to make options such as power windows and air conditioning standard.
Unlike the Japanese, whose 1980s arrival in the U.S. was at first greeted as a threat, Chinese businesses are being courted by states including Michigan, California, Illinois and Georgia.
Not that all arms are open.
Congressional scrutiny has dogged several investments, including the billions of dollars that government-owned funds are investing in top Wall Street institutions. National security concerns have scuttled several deals, including the attempted 2005 purchase of oil giant Unocal Corp. and a $2.2 billion bid to buy the tech company 3Com in February.
In the Swedish coastal city of Kalmar, labor union and media criticism has been the backdrop for delayed Chinese plans to open a hotel and wholesale warehouse for Chinese-made commodities. Project manager Angie Qian tromps around, trying to get things done at the speed she was used to in Shanghai.
"China is developing very quickly and so people work very fast and don't plan very far ahead," says Qian, herself a study in constant motion. "In Sweden everything takes a much longer time."
The $160 million project, going up on the site of a shuttered chocolate factory, could help revive a city abandoned by carmaker Volvo and train maker Bombardier Transportation.
It wouldn't be the first project of its kind. Dubai boasts an enormous Dragon Mart shopping mall and residential complex; Chinese centers with other backers have opened in Eastern Europe, Italy, England and Russia.
But the Kalmar project faces problems.
Fanerdun Group, the company bankrolling the project, has reportedly not received Chinese government approval to transfer funding from China to Sweden. The company has said it will pay wages of Chinese workers into Chinese bank accounts instead of Swedish accounts.
The national construction workers' union and local media have criticized Fanerdun for not paying some of the Chinese workers who helped prepare the site at all. The issue has delayed construction.
Elsewhere, miscalculations have led to early, and sometimes spectacular, failures. There was the Splendid China theme park in Florida that no one really visited. A group of investors never recovered from the fiasco of trying to evict poor tenants from the downtown Los Angeles hotel they planned to refurbish.
Chinese companies that wither often see the first branch as a trophy, and neglect the long-term strategy that can lead to greater profits, according to business professor Ping. He based his survey on 400 Chinese companies doing business in the U.S. and Europe.
Drastic differences in business culture also can hobble a venture. Western managers can demand more authority than Chinese bosses are accustomed to, and official directives can alienate workers.
For all their energy and drive, many Chinese managers and executives lack formal training. That is changing.
At UCLA's Anderson School of Management, for example, Chinese applications more than doubled from 87 in 2005 to 180 in 2007. The 2007 class had 14 Chinese students, the most in the school's history.
Wife and husband Stella Li and Steven Zhu quit high-profile careers in China to study in Los Angeles. Li is slated to graduate this spring — Zhu got his MBA last year and landed at Google doing data-driven sales analysis. Both see an opportunity to gain a sophistication in finance and strategy they couldn't get working back home.
"We definitely want to take all the experience and the things we learned in the U.S. back to China," Li said. "But short term, we would like to get more exposure in business here."
Chinese firms are still learning the kinds of data-driven market analysis, branding and other business practices that are commonplace in the West.
"What's scary to think of is when they marry cost consciousness with U.S.-style just-in-time inventory management," says Charles Freeman, a China specialist at the Washington-based Center for Strategic and International Studies, who recalls talking to a cellphone maker that was storing 100 million headsets behind its factory.
Few Chinese companies have been in the U.S. longer than the American subsidiary of the auto parts giant Wanxiang Group, which incorporated in 1993. The founder of the home company is one of China's richest men. His son-in-law, Pin Ni, led the Chicago-area subsidiary from cheap parts supplier up the value chain by buying or working with companies that were distressed — owing to competition from China.
Wanxiang America Inc. has been welcomed for saving manufacturing jobs. Illinois has proclaimed a Wanxiang Day and Michigan offered the company subsidies.
Pin talks exactly like what he is — an executive who's part of a multinational. It's all about core competence and optimizing strength and horizontal integration. He casts himself as a matchmaker who spots what disparate firms do best to create as efficient a manufacturing process as possible.
"Even today you want to say, is there enough Chinese companies in the United States?" Pin asks. "I would say no."
Contributing: Associated Press Writers Louise Nordstrom and Michael Astor
Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
China's private firms set sights on rest of world
By Justin Pritchard, Associated Press
Amid the torrent of clothes, electronics and toys surging out of China comes a little-noticed export: international companies.
For centuries, individual Chinese have sought their fortunes abroad, creating Chinatowns around their restaurants and shops. Now, Chinese firms are going global, pushed by a government embracing capitalism, pulled by untapped markets and armed with bundles of money from a thriving economy back home.
Auto plants are popping up in Latin America. A sprawling commodity bazaar promises a provincial Swedish city new life. A car parts distributor is snapping up ailing companies in the U.S. Rust Belt, a TV factory hums in South Africa and a high-tech firm is landing contracts to revamp the Persian Gulf's telecommunication networks.
Just as the earlier arrival of Japanese companies changed U.S. manufacturing, over time Chinese companies could affect how their Western rivals approach innovation, competition and business itself.
"We not only consider ourselves pioneers," says Sean Chen, who at 26 is overseeing the construction of a $100 million electrical parts plant and industrial park in the American South. "We also consider ourselves explorers."
Chen and his fiancee, Joy Chen — both took American first names — moved from Shanghai to Atlanta to set up shop for General Protecht Group Inc., a company controlled by his father. While the goal is profits, Sean Chen and his father view the venture almost as a social experiment — its aim, he said through an interpreter, is to marry the best Chinese and American work practices.
"I want to have the efficiency and execution normally shown by the American employees and the brotherhood that a Chinese company normally shows," Sean Chen says. "There are capitalists and there are socialists and I want to see whether they can get along."
The Chinese corporate presence is still small overseas, but it's growing fast:
• Chinese companies invested more than $30 billion in foreign firms from 1996 to 2005, nearly one-third in 2004-05 alone, according to an analysis by Usha Haley, a professor of international business at the University of New Haven. Computer maker Lenovo Group helped launch the frenzy in December 2004 by announcing it would acquire IBM Corp.'s personal computer unit for $1.75 billion.
• In the United States and Canada, Chinese firms now have about 3,500 investment projects, compared to 1,500 five years ago, according to an estimate by Maryville University professor Ping Deng. Large state-owned companies jumped ahead; medium and small private firms are catching up.
• Total investment in the U.S. is between $4 billion and $7 billion, Ping estimates. In Europe, Chinese acquisitions last year alone totaled $563.3 million, according to research company Dealogic.
• Last year, 29 Chinese firms debuted on U.S. stock exchanges, just two shy of the total for the previous three years combined, according to the Bank of New York Mellon Corp.
• The number of U.S. visas issued to Chinese executives and managers who transfer to U.S. posts within their companies nearly doubled to 2,043 between fiscal years 2004 and 2007. The current fiscal year is on pace to top that, U.S. State Department statistics show.
Chinese businesses are not just establishing offices and factories overseas. They also are developing and selling products under their own brands, rather than simply supplying Western firms in search of cheap manufacturing.
The competition may make it harder for American and European firms to milk early profits from cutting-edge products before reducing prices and releasing them to the mass market. Vulnerable sectors include high-definition TVs, portable DVD players, medical technology, and perhaps even cars, according to Peter Williamson, a professor of international management at the University of Cambridge with extensive China experience.
At the Detroit Auto Show in January, one midsized SUV from China with goodies including a leather interior was priced at just $14,000 — less than half what many comparable cars cost. Models could be available by early next year in nine states.
Chinese firms can use their low-cost manufacturing advantage to pile on additional features. And they can do that by copying taste-making Western firms, circumventing the expense of product development. If the quality is high enough, the strategy can be devastating.
"It will pull to pieces the profit models of their competitors," Williamson says. "It's a classic case of attacking your competitor where you know they're reluctant to respond, because it's very costly."
The dynamic recalls how Japanese automakers forced their U.S. competitors to make options such as power windows and air conditioning standard.
Unlike the Japanese, whose 1980s arrival in the U.S. was at first greeted as a threat, Chinese businesses are being courted by states including Michigan, California, Illinois and Georgia.
Not that all arms are open.
Congressional scrutiny has dogged several investments, including the billions of dollars that government-owned funds are investing in top Wall Street institutions. National security concerns have scuttled several deals, including the attempted 2005 purchase of oil giant Unocal Corp. and a $2.2 billion bid to buy the tech company 3Com in February.
In the Swedish coastal city of Kalmar, labor union and media criticism has been the backdrop for delayed Chinese plans to open a hotel and wholesale warehouse for Chinese-made commodities. Project manager Angie Qian tromps around, trying to get things done at the speed she was used to in Shanghai.
"China is developing very quickly and so people work very fast and don't plan very far ahead," says Qian, herself a study in constant motion. "In Sweden everything takes a much longer time."
The $160 million project, going up on the site of a shuttered chocolate factory, could help revive a city abandoned by carmaker Volvo and train maker Bombardier Transportation.
It wouldn't be the first project of its kind. Dubai boasts an enormous Dragon Mart shopping mall and residential complex; Chinese centers with other backers have opened in Eastern Europe, Italy, England and Russia.
But the Kalmar project faces problems.
Fanerdun Group, the company bankrolling the project, has reportedly not received Chinese government approval to transfer funding from China to Sweden. The company has said it will pay wages of Chinese workers into Chinese bank accounts instead of Swedish accounts.
The national construction workers' union and local media have criticized Fanerdun for not paying some of the Chinese workers who helped prepare the site at all. The issue has delayed construction.
Elsewhere, miscalculations have led to early, and sometimes spectacular, failures. There was the Splendid China theme park in Florida that no one really visited. A group of investors never recovered from the fiasco of trying to evict poor tenants from the downtown Los Angeles hotel they planned to refurbish.
Chinese companies that wither often see the first branch as a trophy, and neglect the long-term strategy that can lead to greater profits, according to business professor Ping. He based his survey on 400 Chinese companies doing business in the U.S. and Europe.
Drastic differences in business culture also can hobble a venture. Western managers can demand more authority than Chinese bosses are accustomed to, and official directives can alienate workers.
For all their energy and drive, many Chinese managers and executives lack formal training. That is changing.
At UCLA's Anderson School of Management, for example, Chinese applications more than doubled from 87 in 2005 to 180 in 2007. The 2007 class had 14 Chinese students, the most in the school's history.
Wife and husband Stella Li and Steven Zhu quit high-profile careers in China to study in Los Angeles. Li is slated to graduate this spring — Zhu got his MBA last year and landed at Google doing data-driven sales analysis. Both see an opportunity to gain a sophistication in finance and strategy they couldn't get working back home.
"We definitely want to take all the experience and the things we learned in the U.S. back to China," Li said. "But short term, we would like to get more exposure in business here."
Chinese firms are still learning the kinds of data-driven market analysis, branding and other business practices that are commonplace in the West.
"What's scary to think of is when they marry cost consciousness with U.S.-style just-in-time inventory management," says Charles Freeman, a China specialist at the Washington-based Center for Strategic and International Studies, who recalls talking to a cellphone maker that was storing 100 million headsets behind its factory.
Few Chinese companies have been in the U.S. longer than the American subsidiary of the auto parts giant Wanxiang Group, which incorporated in 1993. The founder of the home company is one of China's richest men. His son-in-law, Pin Ni, led the Chicago-area subsidiary from cheap parts supplier up the value chain by buying or working with companies that were distressed — owing to competition from China.
Wanxiang America Inc. has been welcomed for saving manufacturing jobs. Illinois has proclaimed a Wanxiang Day and Michigan offered the company subsidies.
Pin talks exactly like what he is — an executive who's part of a multinational. It's all about core competence and optimizing strength and horizontal integration. He casts himself as a matchmaker who spots what disparate firms do best to create as efficient a manufacturing process as possible.
"Even today you want to say, is there enough Chinese companies in the United States?" Pin asks. "I would say no."
Contributing: Associated Press Writers Louise Nordstrom and Michael Astor
Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Wednesday, September 3, 2008
Chinese aerospace gets US help
Chinese Jetmaker Gets Western Help
Eager for a Stake in Regional Jet Project,
U.S. Firms Contribute Half of Equipment
By BRUCE STANLEY in Shanghai and J. LYNN LUNSFORD in Dallas
September 3, 2008; Page B1
Western companies are playing a prominent role helping China become a serious new competitor in the global aerospace industry.
About half of the equipment on the ARJ21, the first regional jet made by government-run AVIC I Commercial Aircraft Co., is made by U.S. companies. The 90-seat aircraft represents China's latest bid to eventually challenge Boeing Co. and European Aeronautic Defence & Space Co.'s Airbus in the market for bigger planes. A twice-delayed maiden flight is now scheduled for Sept. 21.
Associated Press
U.S. companies supply half of the equipment on the ARJ21 regional jet made by Chinese government-run ACAC.
Even the U.S. government is involved. The Federal Aviation Administration, citing safety and the participation of so many U.S. firms, opened a bureau in Shanghai last year to help the Chinese win certification for the ARJ21 to fly in the U.S.
Canada's Bombardier Inc., which makes competing regional jets, is angling for a role in ACAC's development of a larger version of the aircraft. It has said it expects to invest $100 million in the larger jet, citing parts-sharing and cost-saving potential for its own jets.
The world's aerospace companies are eager to gain a foothold in a market where air traffic is expected to grow 8.9% annually by Boeing's forecast. Their participation could help China do in aerospace what it has done in industries ranging from toys to cars: move from a basic fabricator to a global competitor.
"We understand that they may well want to develop an indigenous industry, but we want to stay a part of it as long as we can," says Clayton Jones, chief executive of Rockwell Collins Inc., Cedar Rapids, Iowa, which provides radios, navigation equipment and other avionics systems for the ARJ21. "If I don't move in there, somebody else will," he says.
A serious challenger to today's plane- and parts-makers is probably decades away. Passenger jets are extremely complex to design and build. The ARJ21, which lists for $30.5 million, has suffered several delays. Most recently, an equipment delivery delay forced the jet to miss a scheduled inaugural flight in March.
Boeing and Airbus already are offering a new generation of larger jets built from fuel-saving lightweight composite materials instead of the ARJ21's traditional metals. The ARJ21 is "an important airplane for Chinese industry," Boeing Commercial Airplanes President Scott Carson said at the Farnborough International Airshow in July. But he added, "It's not a very exciting airplane and doesn't take you very far into the future."
Still, the assistance of Western parts makers allows China's fledging aircraft makers to buy complex cockpit instruments and flight-control systems and focus on assembly, marketing and creating a much-needed after-sales support network. It also guarantees that Western companies will enjoy maintenance and support roles when the planes go into service. Chinese aviation officials expect to spend more than $600 million on the program; industry experts say they will likely spend much more.
The ARJ21, dubbed the "Flying Phoenix," has won 206 of the 300 orders that ACAC says it needs to break even. The Shanghai-based company touts the plane as well-suited for the high-altitude airports and lightly traveled air routes of western and central China, where Beijing has targeted economic development efforts. Chen Jin, ACAC's vice president for sales and marketing, says the aircraft manufacturer eventually hopes to sell the plane in emerging markets such as Malaysia, Turkey and India. It is preparing to open a sales office in Munich and is seeking air certifications for the jet in Europe.
The sales executive acknowledges there are hurdles to winning sales outside China. "We don't have a very well-known brand, and we don't have a good after-sales service network," Mr. Chen says. The global market for regional jets is crowded, with newcomers from Russia and Japan joining the fray against Bombardier and Empresa Brasileira de Aeronautica SA, known as Embraer.
But ACAC has strong domestic demand. Airbus estimates China will need $391 billion worth of new aircraft of 100 seats or more by 2026, and China's state-controlled airlines could favor domestic manufacturers at the expense of Western companies.
General Electric Co. foresees over the next 20 years a need for at least 500 regional jets in China, a figure that equates to more than $15 billion in engines, spare parts and services. "That was enough to get us excited," says Mike Wilking, president of GE's aviation business in China. GE supplies engines for the ARJ21. Parker Hannifin Corp., which makes fuel, hydraulics and flight control systems for the plane, expects 500 ARJ21s could earn it $275 million in revenue and at least that much in after-sales services. During the jet's design phase, Parker sent three engineers and a program manager to Shanghai from its headquarters in Irvine, Calif.
Components maker Goodrich Corp. has won key positions in several projects, providing wheels and brakes on a Russian-made jet, lighting on the ARJ21 and engine housings on Japan's Mitsubishi Regional Jet. Goodrich Chairman and Chief Executive Marshall Larsen said he has "mixed feelings" about the situation.
Russia and China will need more than 20 years before they will pose a competitive threat, he says. But he adds, "If they can put people in space, they'll definitely be able to build airplanes."
Write to Bruce Stanley at bruce.stanley@wsj.com1 and J. Lynn Lunsford at lynn.lunsford@wsj.com2
URL for this article:
http://online.wsj.com/article/SB122039785023492809.html
Eager for a Stake in Regional Jet Project,
U.S. Firms Contribute Half of Equipment
By BRUCE STANLEY in Shanghai and J. LYNN LUNSFORD in Dallas
September 3, 2008; Page B1
Western companies are playing a prominent role helping China become a serious new competitor in the global aerospace industry.
About half of the equipment on the ARJ21, the first regional jet made by government-run AVIC I Commercial Aircraft Co., is made by U.S. companies. The 90-seat aircraft represents China's latest bid to eventually challenge Boeing Co. and European Aeronautic Defence & Space Co.'s Airbus in the market for bigger planes. A twice-delayed maiden flight is now scheduled for Sept. 21.
Associated Press
U.S. companies supply half of the equipment on the ARJ21 regional jet made by Chinese government-run ACAC.
Even the U.S. government is involved. The Federal Aviation Administration, citing safety and the participation of so many U.S. firms, opened a bureau in Shanghai last year to help the Chinese win certification for the ARJ21 to fly in the U.S.
Canada's Bombardier Inc., which makes competing regional jets, is angling for a role in ACAC's development of a larger version of the aircraft. It has said it expects to invest $100 million in the larger jet, citing parts-sharing and cost-saving potential for its own jets.
The world's aerospace companies are eager to gain a foothold in a market where air traffic is expected to grow 8.9% annually by Boeing's forecast. Their participation could help China do in aerospace what it has done in industries ranging from toys to cars: move from a basic fabricator to a global competitor.
"We understand that they may well want to develop an indigenous industry, but we want to stay a part of it as long as we can," says Clayton Jones, chief executive of Rockwell Collins Inc., Cedar Rapids, Iowa, which provides radios, navigation equipment and other avionics systems for the ARJ21. "If I don't move in there, somebody else will," he says.
A serious challenger to today's plane- and parts-makers is probably decades away. Passenger jets are extremely complex to design and build. The ARJ21, which lists for $30.5 million, has suffered several delays. Most recently, an equipment delivery delay forced the jet to miss a scheduled inaugural flight in March.
Boeing and Airbus already are offering a new generation of larger jets built from fuel-saving lightweight composite materials instead of the ARJ21's traditional metals. The ARJ21 is "an important airplane for Chinese industry," Boeing Commercial Airplanes President Scott Carson said at the Farnborough International Airshow in July. But he added, "It's not a very exciting airplane and doesn't take you very far into the future."
Still, the assistance of Western parts makers allows China's fledging aircraft makers to buy complex cockpit instruments and flight-control systems and focus on assembly, marketing and creating a much-needed after-sales support network. It also guarantees that Western companies will enjoy maintenance and support roles when the planes go into service. Chinese aviation officials expect to spend more than $600 million on the program; industry experts say they will likely spend much more.
The ARJ21, dubbed the "Flying Phoenix," has won 206 of the 300 orders that ACAC says it needs to break even. The Shanghai-based company touts the plane as well-suited for the high-altitude airports and lightly traveled air routes of western and central China, where Beijing has targeted economic development efforts. Chen Jin, ACAC's vice president for sales and marketing, says the aircraft manufacturer eventually hopes to sell the plane in emerging markets such as Malaysia, Turkey and India. It is preparing to open a sales office in Munich and is seeking air certifications for the jet in Europe.
The sales executive acknowledges there are hurdles to winning sales outside China. "We don't have a very well-known brand, and we don't have a good after-sales service network," Mr. Chen says. The global market for regional jets is crowded, with newcomers from Russia and Japan joining the fray against Bombardier and Empresa Brasileira de Aeronautica SA, known as Embraer.
But ACAC has strong domestic demand. Airbus estimates China will need $391 billion worth of new aircraft of 100 seats or more by 2026, and China's state-controlled airlines could favor domestic manufacturers at the expense of Western companies.
General Electric Co. foresees over the next 20 years a need for at least 500 regional jets in China, a figure that equates to more than $15 billion in engines, spare parts and services. "That was enough to get us excited," says Mike Wilking, president of GE's aviation business in China. GE supplies engines for the ARJ21. Parker Hannifin Corp., which makes fuel, hydraulics and flight control systems for the plane, expects 500 ARJ21s could earn it $275 million in revenue and at least that much in after-sales services. During the jet's design phase, Parker sent three engineers and a program manager to Shanghai from its headquarters in Irvine, Calif.
Components maker Goodrich Corp. has won key positions in several projects, providing wheels and brakes on a Russian-made jet, lighting on the ARJ21 and engine housings on Japan's Mitsubishi Regional Jet. Goodrich Chairman and Chief Executive Marshall Larsen said he has "mixed feelings" about the situation.
Russia and China will need more than 20 years before they will pose a competitive threat, he says. But he adds, "If they can put people in space, they'll definitely be able to build airplanes."
Write to Bruce Stanley at bruce.stanley@wsj.com1 and J. Lynn Lunsford at lynn.lunsford@wsj.com2
URL for this article:
http://online.wsj.com/article/SB122039785023492809.html
China Banks' Overseas Assets
Chinese Banks Cut Fannie, Freddie DebtSeptember 3, 2008; Page C2
SHANGHAI -- China's big banks, having trimmed their holdings of U.S. mortgage-related debt, are facing increasingly difficult decisions about how to invest their sizable foreign-currency holdings.
Amid jitters about the future of Fannie Mae and Freddie Mac, China's four biggest listed banks have pared back their holdings in debt related to the two U.S. mortgage giants. At the end of June, the four banks held a combined $23.28 billion of debt issued or guaranteed by Fannie and Freddie. That's a small fraction of the trillions of dollars outstanding, but the reductions attracted interest as a possible gauge of broader sentiment toward such securities.
In earnings conferences in recent days, several Chinese banks said they had trimmed their Fannie and Freddie portfolios since June. Bank of China Ltd., by far the largest holder of Fannie and Freddie securities among the four big banks, said it had sold or allowed to mature $4.6 billion of the $17.3 billion it held as of June 30 -- which was down from more than $20 billion at the end of last year.
China Construction Bank Corp. said it had cut its Fannie and Freddie holdings to just above $2 billion by the end of July, down from $3.2 billion a month earlier. Bank of Communications Co. sold all of its $27 million in holdings in early July. Industrial & Commercial Bank of China Ltd., the country's biggest lender, said it held $2.7 billion worth of Fannie- and Freddie-related debt at the end of June, but didn't provide a comparison with previous months.
Analysts said the banks were likely erring on the side of caution, paring their holdings to please investors and ease concerns about their earnings outlook. While Fannie's and Freddie's shares have been battered this year, their debt generally is still considered relatively low-risk.
Zhang Jianguo, Construction Bank's president, told reporters last week that bonds issued by Fannie and Freddie are still "relatively safe." The U.S. government "has already made clear its guarantee" of the two companies' debt, Bank of China President Li Lihui said. Zhu Min, a Bank of China vice president, said the company "will adopt a cautious stance" in managing its foreign-exchange assets amid global economic weakness.
The shift away from Fannie and Freddie debt further reduces an already dwindling array of attractive foreign-currency investment options, with meager returns on low-risk instruments like U.S. Treasuries and continued instability in major stock markets. Because most developed economies are expected to slow further this year, the global investment climate is unlikely to improve soon, analysts said.
China's banks have significant overseas funds to deploy. Bank of China had $240 billion of overseas assets at the end of June, while the other three big lenders had a combined total of $219 billion.
Some analysts said they see merit in Chinese banks expanding their foreign-currency loan businesses. They have lots of liquidity as many Western institutions are squeezed by the credit crisis, so the Chinese banks may be able to pick up market share in lending to attractive companies.
"They have to deploy their liquidity in some way and at the moment Treasurys don't look very lucrative," said Warren Blight, a banking analyst at Fox-Pitt, Kelton (Asia) Ltd. "But with credit so scarce, they can do a bit more syndicated lending or even direct corporate lending as yields and spreads are getting more attractive on that front."
Syndicated lending is one of the few bright spots in the banking business, analysts said, in part because borrowers have shied away from issuing debt in the face of higher yields. Using more of their overseas funds for corporate lending would help build Chinese banks' international experience.
"Given the fact that a lot of Chinese companies are seeking overseas expansion, it's a good opportunity for cash-rich big Chinese banks to develop a syndicated-loan business," said She Minhua, a banking analyst at China Securities Co.
Bank of China set up three centers earlier this year to manage its syndicated-loan business around the world. It has been involved in a handful of small but noteworthy syndicated-loan deals, including a $592 million deal in Indonesia in which it led a group of 17 other banks to finance a power project. Its BOC Hong Kong (Holdings) Ltd. unit participated in a planned $3 billion refinancing facility for telecom operator PCCW Ltd.
--Rose Yu and Amy Or
URL for this article:http://online.wsj.com/article/SB122037859304991457.html
SHANGHAI -- China's big banks, having trimmed their holdings of U.S. mortgage-related debt, are facing increasingly difficult decisions about how to invest their sizable foreign-currency holdings.
Amid jitters about the future of Fannie Mae and Freddie Mac, China's four biggest listed banks have pared back their holdings in debt related to the two U.S. mortgage giants. At the end of June, the four banks held a combined $23.28 billion of debt issued or guaranteed by Fannie and Freddie. That's a small fraction of the trillions of dollars outstanding, but the reductions attracted interest as a possible gauge of broader sentiment toward such securities.
In earnings conferences in recent days, several Chinese banks said they had trimmed their Fannie and Freddie portfolios since June. Bank of China Ltd., by far the largest holder of Fannie and Freddie securities among the four big banks, said it had sold or allowed to mature $4.6 billion of the $17.3 billion it held as of June 30 -- which was down from more than $20 billion at the end of last year.
China Construction Bank Corp. said it had cut its Fannie and Freddie holdings to just above $2 billion by the end of July, down from $3.2 billion a month earlier. Bank of Communications Co. sold all of its $27 million in holdings in early July. Industrial & Commercial Bank of China Ltd., the country's biggest lender, said it held $2.7 billion worth of Fannie- and Freddie-related debt at the end of June, but didn't provide a comparison with previous months.
Analysts said the banks were likely erring on the side of caution, paring their holdings to please investors and ease concerns about their earnings outlook. While Fannie's and Freddie's shares have been battered this year, their debt generally is still considered relatively low-risk.
Zhang Jianguo, Construction Bank's president, told reporters last week that bonds issued by Fannie and Freddie are still "relatively safe." The U.S. government "has already made clear its guarantee" of the two companies' debt, Bank of China President Li Lihui said. Zhu Min, a Bank of China vice president, said the company "will adopt a cautious stance" in managing its foreign-exchange assets amid global economic weakness.
The shift away from Fannie and Freddie debt further reduces an already dwindling array of attractive foreign-currency investment options, with meager returns on low-risk instruments like U.S. Treasuries and continued instability in major stock markets. Because most developed economies are expected to slow further this year, the global investment climate is unlikely to improve soon, analysts said.
China's banks have significant overseas funds to deploy. Bank of China had $240 billion of overseas assets at the end of June, while the other three big lenders had a combined total of $219 billion.
Some analysts said they see merit in Chinese banks expanding their foreign-currency loan businesses. They have lots of liquidity as many Western institutions are squeezed by the credit crisis, so the Chinese banks may be able to pick up market share in lending to attractive companies.
"They have to deploy their liquidity in some way and at the moment Treasurys don't look very lucrative," said Warren Blight, a banking analyst at Fox-Pitt, Kelton (Asia) Ltd. "But with credit so scarce, they can do a bit more syndicated lending or even direct corporate lending as yields and spreads are getting more attractive on that front."
Syndicated lending is one of the few bright spots in the banking business, analysts said, in part because borrowers have shied away from issuing debt in the face of higher yields. Using more of their overseas funds for corporate lending would help build Chinese banks' international experience.
"Given the fact that a lot of Chinese companies are seeking overseas expansion, it's a good opportunity for cash-rich big Chinese banks to develop a syndicated-loan business," said She Minhua, a banking analyst at China Securities Co.
Bank of China set up three centers earlier this year to manage its syndicated-loan business around the world. It has been involved in a handful of small but noteworthy syndicated-loan deals, including a $592 million deal in Indonesia in which it led a group of 17 other banks to finance a power project. Its BOC Hong Kong (Holdings) Ltd. unit participated in a planned $3 billion refinancing facility for telecom operator PCCW Ltd.
--Rose Yu and Amy Or
URL for this article:http://online.wsj.com/article/SB122037859304991457.html
Subscribe to:
Posts (Atom)
