Economy

Chinese firms show zeal for stakes in Swedish businesses

By Lan Lan (China Daily)
Updated: 2011-05-18 10:48

BEIJING - Chinese companies are showing greater appetite for purchasing equity stakes in Swedish-owned companies, rather than investing in start-up projects, said a Swedish investment official.

More than 200 Chinese companies have invested in Sweden in the past 10 years, but large-scale equity transfer has become the new trend, Eddie Chen, vice-president of Investment Sweden, the country's official investment promotions agency, said in an interview with China Daily.

"International businesses, products and technology are all trying to connect with the Chinese market after the financial crisis and more comprehensive, equity and technology partnerships have become a model," he said.

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While Zhejiang Geely Holding Group Co successfully purchased Volvo Car Corp at $1.8 billion last year, a second privately owned Chinese automaker, Hawtai Motor Co Group Ltd, failed to acquire an equity stake in Spyker Cars NV, the owner of cash-strapped Saab Automobile AB. A May 12 report said Hawtai's bid was unsuccessful because it could not obtain necessary regulatory approval.

Five days later, Chinese car dealer Pangda Automobile Trade Co agreed to buy a 24 percent stake in Spyker Cars, according to Bloomberg.

"About 15 years ago, it was Ford and GM who acquired Volvo and Saab; 15 years later, the two premier Swedish brands were transferred or partly transferred to Chinese automakers' hands, which shows equity and technology partnerships have become the new model for cooperation between emerging and Western economies - a departure from the traditional manufacturing joint ventures," said Chen, who was involved in Hawtai's bid for Spyker and Geely's purchase of Volvo.

The reason behind these deals is the huge market potential from China's large consumer base, which has become the world's largest automotive market, he said.

"Money is not a problem (in China). With a good strategy or a good opportunity, it's easy to find investors willing to invest. That's encouraging," Chen said.

China is making efforts to diversify the investment of its $3 trillion in foreign exchange reserves and foreign direct investments.

Chen added that there are different combinations of sources of financing, which is dependent on each project. Certain projects were wholly funded from internal funds while others had groups of investors that included the local government's share of equity and various kinds of loans.

He said it took less than 10 days for Hawtai and Saab Automobile to initiate and wrap up negotiations.

"Many things were certainly already there. Saab had the offers and terms, and it was looking for a partner to negotiate on details," Chen said.

Saab halted production last month because of financial difficulties in paying suppliers.

The "fast reaction and quick adaptation to change" of China's private companies was a major factor in the successful purchases of overseas assets, he said, adding that was nearly impossible just a few years ago.