Hony’s Zhao: Foreign prejudice against Chinese investment is unfair

The WEF turned its focus to Chinese outbound investment in the context of the country's growing importance to global economic growth. A relatively longstanding investor in US sovereign debt, China has in recent years turned its attention to overseas corporate M&A and state-backed acquisitions of natural resources and technologies. This push, and especially the government's role in it, has drawn criticism from other nations where officials are already unhappy about wider imbalances such as China's perceived undervalued currency and mercantilist trade practices.

These perception problems are an issue for any private equity firm looking to leverage cross-border opportunities, a well-documented area of interest for Hony.

Speaking at AVCJ's China forum in May of last year, Zhao said there was scope for PE involvement in supporting Chinese companies that have become strong on the back of domestic growth but now need to hedge their exposure and expand overseas. Similarly, Hony wants to invest in foreign companies looking to build a platform in China - and this was one of the reasons it backed Singapore-listed Biosensors International Group in late 2010.

Earlier this month, Hony announced that it had closed its fifth US dollar-denominated fund at $2.4 billion and collected a total of RMB10 billion ($1.6 billion) for its second renminbi-denominated fund.

Also speaking in Davos, Pascal Lamy, director general of the WTO, warned that Chinese firms are likely to continue to encounter problems as they invest overseas. "We will see in the years to come, as China's investments grow and grow ... We will have the same sort of political turbulences as we have had on trade for the last 10 years," he said.

Lamy suggested that one way China might ease global concerns about real and potential corporate shopping sprees is by being more open about its own poverty problems. Other WEF participants offered a more nuanced view on China's domestic market. Yale President Richard C. Levin suggested the rest of the world could be grateful for China's investment interest, as eventually the country would have to spend more on addressing local issues.

Broadly speaking, this relates to ongoing calls from the US and Europe for Beijing to open up the services sector to greater international competition, and the argument that deregulation is key to boosting domestic consumption and thereby delivering sustainable long-term growth.

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• Topics
• Greater China
• Investments
• China
• Hony Capital
• Outbound investment