In 2000, shortly before acceding to the World Trade Organization (WTO), the Chinese government came to the view that local companies would need to be globally competitive if they were to match growing rivalry from established multinationals in the home market as well as contributing to China’s broader integration into the world economy. It announced a zou chuqu policy (which loosely translates as ‘go global’) that encouraged local companies to make acquisitions abroad. Numerous state-owned enterprises (SOEs) as well as private corporations took up the opportunity, investing in companies large and small on five continents. According to statistics from Thomson-Reuters, from $1.6 billion in 2000, the value of Chinese mergers and acquisitions (M&A) rose to $70.3 billion by 2008, falling back to $40.6 billion in 2009 in the aftermath of the global financial crisis, but then recovering in 2010 to reach $55.4 billion (see Figure 12.1).
Behind the aggregate statistics, however, the type of cross-border M&A activity undertaken by Chinese companies has varied considerably over time. The first wave of overseas M&A deals, up until 2006, were aimed at accessing products’ designs, brands, distribution and sometimes production capacity, overseas, with the aim of growing sales in foreign markets – what has been termed in the literature ‘springboard’ acquisitions (Luo and Tung, 2007). A second wave of acquisitions began in 2006 when the focus of acquisitions shifted to hard assets like mineral deposits and oil and gas reserves – ‘resource seeking’ acquisitions (Bresman et al., 1999; Forsgren, 2002) in the narrowest sense of the term. There was also a boom in acquisitions of stakes in financial services companies abroad in 2007 as Chinese financial institutions, with large cash reserves, sought to expand their operations abroad. The timing, with hindsight, was catastrophic – although Chinese financial institutions were hardly alone among their global peers in having their fingers burnt in this arena.