More China GPs look to tap outbound opportunity - AVCJ Forum

"In the next 10 years China will move to the next stage of opening up," said Tun Lin, chief economist and executive vice-president at Hony Capital. "In the first phase foreign capital came to China in the form of foreign direct investment, but the next phase will see Chinese capital going abroad and bringing back quality services."

John Lin, managing partner with NDE Capital, said his firm is already looking to tap demand from China's growing middle class for overseas products and services by investing in brand names overseas that are undervalued in their own markets, and bringing them into China.

He cited the example of a dominant European player in the food segment that had no China strategy. The firm had done well in other parts of Asia, and wanted to enter China, but their first backers collapsed. "In this scenario we will take a strong position with a strategic partner from Asia and bring them to China where our role will be as an investor that helps them grow in China," said Lin.

He added that buy-and-build strategies also are increasingly becoming a means of taking advantage of the country's fragmented industries.

Y.R. Cheng, a partner with Lunar Capital, endorsed this approach, noting that buy-and-build is a key part of his firm's strategy in the consumer sector. For example, Lunar teamed up with Italian children's fashion brand "I Pinco Pallino" to expand the company's presence in China and East Asia.

"You have to almost approach these acquisitions as a strategic because it is not easy to build a new brand in China any more," said Cheng. "It might be a strong brand in Europe but you must have the China business foundation in order if you are to realise that opportunity."

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