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20.06.2013Growing Number Of Rich Chinese Helping To Spur Country's Overseas Investments

What's the significance of these projects for international businesses and investors?


Russell Flannery, Forbes.com

Chinese billionaire Wang Jianlin thrust his Dalian Wanda Group into the headlines in Europe yesterday with $1 billion of investments in two projects the UK: the purchase of a 92% stake in yacht-maker Sunseeker and a high-end real estate development in London.  What’s the significance of these projects for international businesses and investors? 

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To find out more, I exchanged yesterday with Jeongwen Chiang, the chair of the marketing department at the China Europe International Business School in Shanghai.  Excerpts follow.

Q. How does Wanda’s $1 billion of UK investments fit into the larger trend of rising overseas investment by Chinese companies?

A.  Ideally, acquisitions create synergy or a “one plus one is greater than two” effect for a parent company.  For example, recognizing that food safety has become a concern for Chinese, Shuanghui recently bid $4.7 billion to buy Smithfield Foods SFD -0.03%. Another example is Fosun’s investment in Club Med. It sees the upside potential of the high-end vacation business, particularly from Chinese tourists.  Wanda’s acquisition of luxury yacht maker, Sunseeker, and its high-end hotel development in London are partially because of the fast-rising number of rich Chinese, too.  More significantly, through projects abroad, Wanda can extend its operations overseas and truly become an international name as a high-end market developer. They add value to its creditability domestically.   That said, whether they are mature or capable enough to take on the challenge is yet to be seen. (In any case,) we can anticipate more and more overseas M&A by Chinese.

Q. What differentiates Wanda from other Chinese private-sector companies?

A. Wanda is known for its commercial properties, hotels, tourism and entertainment.  To replicate projects everywhere is easy; to make them successful with good returns and repute is not. Wanda has managed to be good at both. In China, many companies have strayed from their core business and entered unrelated businesses simply because they believe money is there.  As a result, many fail. Wanda has remained focused.  This is not easy, and says a lot about the leadership of its chairman, Wang Jianlin.  

Q. Wanda is to some extent investing in China’s own luxury market. Yet hasn’t growth slowed of late? What’s the 3-5 year outlook there?

A. The luxury goods market is slowing down as a whole, but the luxury yacht business is not.  According to a Fortune Character Institute report, the luxury yacht business grew over 500% between 2010 and 2011, and continued to expand in 2011-12. That means this particular luxury segment is not affected at all. The number of super rich Chinese has continued to grow despite the slowdown in the economy.  On the surface, Wanda’s investment would seem to go against the trend but in reality, it may be a smart investment for the long term if the economy turns around in 3-5 years.  Plus, lake or beach luxury villas are becoming more and more popular for wealthy Chinese, within China or abroad.  A yacht is a perfect “toy” for these people. It also complements Wanda’s interests in luxury hotels and condos.


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