Cover Story July 15, 2009, 10:50PM EST

China Revs Up Its Dealmaking Machine

(page 3 of 3)

Browse Issues

Browse the BusinessWeek Archive

Related Items

Story Tools

Other Chinese missteps include Shanghai Auto's 51% purchase in 2004 of Korea's Ssangyong Motors (which is now bankrupt) and television maker TCL's acquisition of RCA Thomson (generally seen as a failure). The jury is still out on the acquisition of IBM's (IBM) PC business by China's Lenovo.

But the Chinese are learning. Analysts think Chinese authorities probably froze a deal for GM's Hummer by construction equipment company Sichuan Tengzhong out of fear the Chinese outfit lacks the expertise to run a U.S. company (the other reason for examining the deal is fear of the Hummer's environmental impact). PwC's Phillips says energy companies "have moved up the learning curve very quickly." Bain's Leung describes how executives from a Chinese consumer-products marketer recently traveled to the U.S. to meet with suppliers, customers, and executives of a target company. The thorough due diligence convinced the Chinese to back out.

One area where the Chinese tread softly is in the U.S. They recall the abortive 2005 bid for Unocal by China National Offshore Oil (CEO), which ignited a firestorm in the U.S. Congress. "The Chinese perception is that they are trying to acquire companies using market mechanisms, yet they get caught up with political controversies," says Evan Feigenbaum, an ex-Deputy Assistant Secretary of State under George W. Bush.

Still, U.S. concern hasn't held back the Chinese elsewhere. Acquisitions have gone ahead in Australia, including a $1.4 billion takeover bid by China Minmetals for Oz Minerals and a $770 million investment in Fortescue Metals by Hunan Valin Iron & Steel. "It is natural for companies when they grow up to find new opportunities outside," says finance professor Zhou. "There will be more Chinese acquisitions abroad. And the world will get used to it."

Business Exchange: Read, save, and add content on BW's new Web 2.0 topic network

Features-In Depth

There is no shortage of Asia boosters these days. Minxin Pei is not one of them. In an essay titled "sia' Rise," appearing in the July/August issue of Foreign Policy, the scholar cautions readers not to believe the hype. Pei debunks an assortment of widely parlayed myths, such as that Asia will lead the world in innovation, that its brand of capitalism is more dynamic than the West's, and that the U.S. is losing its influence in the region.

To read Pei's essay, go to http://bx.businessweek.com/china-business/reference/.

With Stanley Reed and Mark Scott in London, Steve LeVine in Washington, D.C., and Jack Ewing in Frankfurt. Roberts is BusinessWeek's Asia News Editor and China bureau chief. Balfour is Asia Correspondent for BusinessWeek based in Hong Kong.