Examples of Chinese Investments

China outbound mergers and acquisitions have come a long way since Lenovo purchased IBM's laptop business in 2004. China's outward M&A deals have increased dramatically in recent years both in dollar terms and the number of deals closed. As a percentage of total M&A activity, outward bound deals are catching up, with one estimate showing an increase from 8.5% in 2007 to nearly 25% in the first three quarters of 2009. After a banner year in 2009, when Chinese firms found themselves positioned well compared to their cash-strapped counterparts overseas during the recession, the prospects for the coming years are rosy.

China is undeniably a global economic powerhouse. While the global financial crisis was a catastrophe for most economies, it was more an opportunity than a challenge for China. United States is keen to allow Chinese investment into small and medium US banks. America now realises that for its economy to come out of the crisis fully, foreign investment is badly required. Meanwhile, China with its $2-trillion foreign currency assets is on the prowl.

The Chinese are present in impressive numbers in Europe, the United States, Canada, South America, Australia, Africa, Singapore and Japan. And they want to expand further and increase their global footprint. Almost everyday we find a Chinese company announcing to buy a portion in some foreign company. Recently, media reports suggested that India's Jindal Steel & Power may well be out of the race to buy Australia's Rocklands Richfield after Chinese coal producer Meijin Energy topped its takeover bid at $200 million. At the time when recession was at its peak (economists indicate that it is on the wane now), and the US dollar was getting weaker, China's state-owned fund -- China Investment Corp Ltd -- injected $5 billion into global merchant banker Morgan Stanley. Also, Citic Securities, a private Chinese firm, invested $1 billion in New York-based global investment bank Bear Stearns. It isn't just the biggies (like the Lenovo-IBM deal) that the Chinese are interested in: smaller, lesser-known companies in the US too are being bought out. So let's see what the Chinese have been strategically buying across the world...

Aluminum Corp of China (Chinalco) buys a 12 per cent stake in Rio Tinto
In February 2008, Aluminum Corp of China (Chinalco) joined hands with Alcoa Inc to buy a 12 per cent holding in UK-listed Rio Tinto for $14 billion, just days before mining rival BHP Billiton (the Australian mining giant) was to make a formal offer for Rio Tinto. The deal was the biggest foreign investment by any Chinese firm. Then exactly a year later, the Chinese firm decided to increase its holding from 9.3 per cent to 18.5 per cent in Rio Tinto, but by now the fear of Chinese power had risen high and the deal faced stiff opposition in Australia. Chinalco, however, still holds 9 per cent stake in Rio Tinto. The expansion deal was called off in June 2009 and Rio raised $20 billion by issuing new stock to BHP Billiton. The Australian foreign investment review board has recently announced that no foreign company would be allowed to hold more than a 15 per cent stake in any of the country's natural resources companies.

China Petroleum Corp (Sinopec) acquires Addax Petroleum
In June 2009, China Petroleum Corp -- or Sinopec -- acquired Addax Petroleum, one of Africa's biggest producers of oil for $7.2 billion. In cash. The deal marked China's aggressive push into Africa and the Middle East. It gave Sinopec control over 42.5 million barrels of crude. The Sinopec deal surpassed China National Petroleum Corp's $4.18 billion takeover of PetroKazakhstan in 2005 and came three weeks after Rio Tinto scrapped the $19.5 billion proposed investment by Chinalco to raise its stake in the company. China is an energy-hungry nation, and its rapidly growing economy required more and more reserves it keep it going. That is why the Asian giant has been buying into natural resources and reserves globally. Sinopec, PetroChina, CNOOC Ltd and other Chinese firms on the prowl are not hindered by a credit crunch that affects other nations. Low-cost loans from government-owned banks promise an unending supply of funds to companies that bid for offshore reserves making it easier for them to acquire strategic foreign assets.

Industrial and Commercial Bank of China buys a 20 per cent stake in South Africa's Standard Bank
In March 2008, China's largest bank -- Industrial and Commercial Bank of China -- bought a 20 per cent stake in South Africa's Standard Bank for $5.6 billion in cash. This was China's largest single investment in Africa. In December 2007, China Investment Corp Ltd bought about 9.86 per cent of investment bank Morgan Stanley for $5 billion. China unveiled a $200-billion wealth fund in September 2007 to buy into the foreign financial sector. As a start, the fund invested $3 billion in Blackstone Group, an American private equity firm.

China National Petroleum Corporation buys Petrokazakhstan
In August 2005, China National Petroleum Corporation bought Petrokazakhstan, Kazakhstan's third largest oil firm, for $4.18 billion. Interestingly, this was soon after the bid made by China National Offshore (CNOOC) for Unocal went bust. In acquiring Petrokazakhstan, CNPC beat India's oil major Oil and Natural Gas Corp. ONGC in association with steel tycoon Lakshmi Mittal had offered $3.6 billion for the company, way too less than that Chinese offer. Image: Chinese employees of China National Petroleum Corp. work at Tarim Oil Field.

Lenovo Group acquires the controlling stake in IBM's PC business
In December 2004, China made what then was the most stunning acquisition: the nation's largest personal computer maker, Lenovo Group, acquired the controlling stake in IBM's PC business. The $1.25 billion deal saw Lenovo jump to the third spot amongst the world's largest PC makers. The deal also saw IBM getting an 18.9 per cent pie in Lenovo. This acquisition saw Lenovo extend its Asia-alone presence on the world stage, and allowed it to save business costs. It gave the company a huge opportunity to tap into European and American markets: a battlefield of sorts where Dell and HP are the biggest players.

Aluminum Corp of China (Chinalco) buys Vancouver-based Peru Copper
In June 2007, Aluminum Corp of China (Chinalco) bought Vancouver-based Peru Copper for $840-million. Peru Copper's main asset was its Toromocho copper project and also -- according to reports -- the largest undeveloped copper deposits in the world. In November 2007, Ping An Insurance, China's second largest life insurer, bought a 4.2 per cent stake in Dutch-Belgian financial services firm Fortis for $2.7 billion. The deal, which made Ping An the top shareholder in Fortis, became the largest overseas acquisition by a Chinese insurance company, and followed the insurer's $154 million purchase of 9 per cent of Hong Kong fund manager Value Partners. In September 2008, China Oilfield Services Limited, a listed arm of the country's biggest offshore oil producer China National Offshore Oil Corp, bought Norway's Awilco Offshore ASA for about $2.5 billion to expand capacity and widen its footprint overseas.

CNOOC buys stakes in four deepwater exploitation licenses in the Gulf of Mexico from Norway's Statoil
In the first week of November this year, China National Offshore Oil Corp bought limited stakes, for an undisclosed small amount, in four deepwater exploitation licences in the Gulf of Mexico from Norway's Statoil. It is worth mentioning this deal because in 2005, a $18.5 billion CNOOC bid for US energy firm Unocal was blocked amidst concerns over the sale of strategic assets to China. With this new arrangement, CNOOC has become the first Chinese firm to develop an oil field in US waters in the Gulf of Mexico. This could also be a harbinger to China's future deals with US oil majors. CNOOC is also in talks with Nigeria to acquire large stakes in some of the world's richest oil blocks for an estimated $30 to 50 billion. CNOOC is bidding for 6 billion barrels of oil, about a sixth of Nigeria's total reserves! Global oil firms like Shell, Chevron, Total and ExxonMobil control some 23 oil blocks in Nigeria. However, licenses of 16 of these are soon to expire.

Sinochem Group in talks to seal a deal to buy an oil firm in Kazakhstan for $320 million
On November 9, 2009, China's state-owned Sinochem Group, which is engaged in the development of agriculture, energy, chemistry, real estate and finance, was in talks to seal a deal to buy an independent oil firm in Kazakhstan for $320 million. The deal came after China Investment Corp in late September invested $939 million to buy an 11 per cent stake in JSC KazMunaiGas Exploration Production, the second-largest oil producer in the country. Again in September, CIC invested $850 million to acquire 14.9 per cent of Nobel Group, the Hong Kong commodity trading group. In August, Sinochem agreed to spend $878 million to acquire London-listed Emerald Energy Plc. In September, Sinochem offered to buy Australia's Nufarm for $2.4 billion to get a foothold into a global distribution network for pesticides and herbicides. This was China's second proposal to buy Nufarm. However, China National Chemical Corp, backed by US private equity firm Blackstone Group, ended talks to buy Nufarm for $2.6 billion in December 2007 without giving a reason. Also, in November this year CIC agreed to buy a 15 per cent stake of listed US power generator AES, and to buy 35 per cent of AES' wind generating business.