How the Chinese are Shopping
Chinese enterprises are attempting to pick up stakes in businesses worldwide after coronavirus has led to cheap valuations
Chinese companies, both public and private, have been on a global shopping spree of late after equity indices took a beating worldwide due to the coronavirus pandemic. All major global indices are deep in the red except that of China which has performed much better relatively because of timely government action and optimism of the Chinese.
This opens a can of new opportunities for hungry Chinese investors who have the money but are just not able to find the right investments. Developments in a number of countries of late indicate that these well off investors are starting to find strong players in different countries worth investing in amidst cheap valuations. These companies are now in desperate need of capital to stay alive and will go the extra mile to get help, irrespective of who the help is from. This creates a perfect match between these companies and Chinese investors. This is a huge leap for China in its quest for global domination.
India
CNIC Corporation, a Chinese state-backed investment fund, is in talks of buying a 10% share in Greenko, a renewable energy firm headquartered in Hyderabad.
People’s Bank of China increased its holding in HDFC to over 1%, which is the threshold after which you are required to declare your holdings to the public. This is a bright sign for India’s real estate sector because the Chinese seem to be betting big on it once the lockdown eases.
France
Shanghai Yuyuan Tourist Mart Group Company Limited recently announced an acquisition of a 55.4% stake in French jewelry brand Djula for 210 million yuan ($30 million).
Italy
Italy has been of particular interest to China because of its geographical location. Italy also signed China’s Belt and Road Initiative Accord recently. The Chinese have been pouring investments into Italy over the last few years and are now tightening their grip over certain companies.
Chinese tech giant Huawei recently announced a $3.1 billion dollar investment plan in Italy which will generate over 1000 jobs in the next 3 years.
ChemChina Chemical Corporation owns a majority stake in Italian tyre manufacturer Pirelli. 6% stake of Salvatore Ferragamo, an Italian luxury fashion brand, also belongs to the Chinese.
Wuhan, being a manufacturing hub for designer goods, had direct flights to Italy which is home for several luxury fashion brands like Prada and Gucci. These brands are headquartered in Lombardy, which is one of the worst affected regions in Italy because of the pandemic. This is because of the continuous movement of Chinese people and Chinese goods to Lombardy from Wuhan, the epicenter of the pandemic.
Australia and Spain
Though there haven’t been any headline-making acquisitions in these countries, the governments have decided to impose several restrictions on foreign investments in local companies.
In Spain, the government said that investors outside the European Union will require a new authorization from the government if they wish to control or increase their participation to more than 10% in a local company, be it public or private, in a strategic sector.
Australia too has tightened regulations on foreign investments to avoid hostile takeovers and discourage predatory behavior from foreign investors which doesn't align with national interests.
The pandemic has caused deep dents in the American and European economies and China, because of the timely handling of the virus, is now in a strong position globally and is expected to emerge as an even bigger economic giant post the pandemic.
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