The 2nd China Overseas Investment Fair holds a ribbon-cutting ceremony in Beijing on Tuesday, November 2, 2010. [Photo: CRIENGLISH.com/Zhang Xu]
A senior Chinese expert says Chinese companies should aim to cultivate their own international brands in the long term, not just buy them from abroad.
Lu Jinyong, director of the China FDI (Foreign Direct Investment) Research Center, made the remarks Tuesday at the Second China Overseas Investment Fair in Beijing.
Chinese companies invested 36.3 billion U.S. dollars overseas in the first nine months of this year, a 10.4-percent year-on-year increase, in non-financial investment sectors, as other companies, hit by the global downturn, reduced overseas investment.
But Lu explained, "Some Chinese companies made a mistake: They took the overseas acquisition of brands as "blood relationship" brands and wanted to get high profits from them in a short time, and didn't realize they couldn't become the companies' major brands. An own brand must exist first, assisted by the brand acquired from overseas."
He believes overseas acquisitions are one way of speeding up the growth of multinational companies, but should not be seen as the main or most efficient means of growth. In fact, a massive amount of funds and decades of research and development are needed to cultivate China's own international brands.
Many Chinese companies have shown great interest in overseas acquisitions in recent years, like SAIC's acquisition of Korean Sangyong Motors, TCL's acquisition of Germany's Schneider Electric and French Thomson, Lenovo's acquisition of IBM, and so on. In 2009, the amount of overseas acquisitions reached 17.5 billion U.S. dollars, occupying one-third of total overseas investment. Among the hundreds of overseas acquisitions, most were brand acquisitions.
