There are five kinds of Chinese overseas investments (or at least JVs) – which are not mutually exclusive – in rough order of priority:
– Natural resources: oil and gas (Sinopec, Cnooc and PetroChina have all been very active in several continents, including North America – Nexen, Canada), coal, steel, minerals (incl Australia’s Sundance), even arable land (parts of Africa and South America) – which serve an obvious need.
– Infrastructure and other tangibles: manufacturing plants (Putzmeister), oil refineries (INEOS’ Grangemouth (Scotland) and Lavéra (France), utilities (Redes Energeticas Nacionais, Energias de Portugal, Thames Water; Brazilian electricity grid), office blocks (Canary Wharf, London), housing in the US; Spanish construction company; all sorts in parts of Africa and the Caribbeans (sports stadium, holiday resorts, roads, ports, etc) – which are ‘safer’ than holdings of US or Euro bonds and provides relatively predictable yields; they often also provide technology transfer at no additional cost.
– Technology: esp new and innovative (UK’s Centre for Integrated Photonics); geothermal energy (Iceland); Saab (to Chinese-Swedish JV); Hawker light aircraft (US); A123 Battery (US) – which builds for the future.
– Brands: especially luxury brands like yachts (Ferretti), high fashion (Cerruti, Sonia Rykiel), essentials (Weetabix, Putzmeister); soccer (inter Milan) – which reduces the outflow of currency and increases the inflow as the population gains affluence and demand for luxury goods continue to expand. But also other brands such as Saab.
– Financial houses, esp owners/managers of funds (BlackRock) – which are not as ‘safe’ as resources and tangibles, but much safer that Euro and $ bonds.
Sources:
- Lombard Odier – http://www.ft.com/cms/s/0/5c86a3ec-259d-11e1-9c76-00144feabdc0.html#axzz1mGUzbFix;
- China Daily – http://europe.chinadaily.com.cn/europe/2012-02/09/content_14565616.htm;
- McKinsey
- Boston Consulting Group
- Euromonitor
- News articles
CHINDIA ALERT: You'll be living in their world, very soon 