Tough Love for Hapless Chinese Investors Abroad

​David Murphy is a PhD candidate at the Australian Centre on China in the World, ANU. His research on corporate political activity in China is focussed on the influence exerted by major Chinese corporations and industry bodies on trade policy. He has worked in both Australia and China in consulting and advisory firms specialising in trade policy analysis and advocacy, including China Policy. He is an alumnus of the University of Melbourne and the Inter-University Program of Tsinghua University.The Editors


Jin Liqun at Davos Economic Forum

Jin Liqun at the Davos Economic Forum

China’s debut as a major source of foreign investment has been one of the biggest stories in global finance for the better part of a decade now. Corporate leaders and financiers have forged relationships between Chinese capital and foreign enterprises of a scale and kind unprecedented in Chinese history. As a consequence, a new layer of intimacy binds China’s commercial and political relations with many other countries.

Rising tensions between Chinese investors and the foreign governments that regulate them, however, have frequently overflowed into public acrimony. In some cases — such as CNOOC’s failed bid for Unocal in 2005 and Chinalco’s failed merger with Rio Tinto in 2009 — frictions have threatened to compromise bilateral relations between China and host countries.

Considerable debate continues in many destination countries about how best to handle the rapid rise in Chinese investment. Equally, in China, prominent voices have weighed in on what its overseas investors can and should do to reduce tensions in the future.

Having served as Vice-Minister of Finance and Chairman of China International Capital Corporation, few are better placed in China to reflect on the problems facing a new, big global investor than Jin Liqun 金立群. Speeches he has delivered over the last few years offer four main lessons for Chinese firms investing abroad.

1. Chinese investors need to do their homework

In a conference on investment hosted by Tsinghua University in September 2013, Jin told his audience (in English) that only about thirty percent of Chinese overseas outbound investment seemed to be successful — that is, good for China and good for the host country.[1]

Jin places the blame for this squarely on his less successful peers in the world of Chinese business. For him, poor investment decisions seem to reflect more on the character and quality of China’s commercial elites than their relative inexperience in acquiring and managing foreign assets. He accuses managers of state-owned enterprises of the classical sin of carelessly spending other people’s money, calling on them ‘to think of the money as their own money’ and ‘not think of it as the money of China or public money.’

At the same time, Jin by no means idealises private investors. ‘Just because it is your own money’, he insists, ‘doesn’t mean you will manage it well.’ He illustrates what he sees as a nation of ‘instinctive gamblers’ with the ‘very bad case’ of an iron and steel company investing in Australia, which he doesn’t name but is presumably Citic Ltd’s Sino Iron enterprise:

They bought an iron ore mine. I think the contract was for thirty years. Without having looked at how they could ship iron ore out of it. I think it’s idiotic. And they came to me and they said can you put some money in, otherwise this project is going to die. And I said why should I put money in without a solution?

While it might be said that due diligence presents problems for inexperienced Chinese companies working in new markets, Jin’s criticism is as much about attitude as it is about competence.

2. Chinese investors need to work with respected multinationals rather than trying to manage everything themselves

On cross border mergers and acquisitions (M&A), Jin characterises China as ‘just a student’ who is ‘yet to learn from multinationals of developed countries.’ Chinese firms need to overcome their aversion to forming partnerships with firms in target markets that understand how they operate:

In almost all of the successful M&A overseas, Chinese companies work with renowned, well-established Western multinationals. Our people sometimes want to take it all. They are reluctant to work with other multinationals for fear of having some big chunk of profit taken away from them. I think this kind of mentality is very bad. I advise some of these people. I say work with well-established multinational companies. And pick a very good local company. You work together. Don’t try to take everything. Work with them because they are well-known companies. You don’t have to worry about their corporate governance. You don’t need to worry about them cheating you. They are well connected in their countries.

Jin said that if the Chinese investor in the iron ore mine had been willing to work with and share dividends with the Australian shipping lines, rail companies and other firms with the wherewithal to get their product to market then they wouldn’t have found themselves begging him for a bailout.

3. Chinese firms should avoid alarming other countries with triumphant rhetoric every time they close a deal.

In the Chinese version of the Harvard Business Review in December 2012, Jin wrote


In the process of investing overseas, Chinese firms should be prepared for the cautious mentality of foreign governments.


I believe Chinese enterprises investing overseas should stress commercial considerations, especially private enterprises. Don’t talk about strategy; that will scare people half to death. We should plainly explain that we need to get rid of trade barriers because our production capacity has increased. Isn’t it a good thing if our businesses create jobs in your country? In business, we should talk about business. We should not contribute to others’ misgivings. We actually don’t have that much to speak of that should scare people.[2]

He was speaking at the time when the Chinese business media were celebrating China National Offshore Oil Corporation’s purchase of Canadian oil firm Nexen for $US15 billion — the largest Chinese foreign acquisition to date. Lin Boqiang 林伯强, a senior energy industry figure, had heaped praise on CNOOC’s strategy, going as far as to suggest that the deal represented a watershed event in the evolution of China’s ‘Going Out’ policy:


The grand strategy for China’s oil companies to ‘go out’ has progressed from just searching for energy resources at the outset to full participation in the industry now.

Jin is more circumspect:


What does CNOOC’s success in buying Nexen explain? It explains that even in an environment not conducive to cross-border mergers, where political pressure is intense, if you prepare properly then it’s possible. But this is not to say that we will have many more great successes from now on. Nor does it mean that barriers to Chinese investment from abroad have reduced. The media says this is a milestone. But you can pass a milestone and still have nothing to show for it.

Instead, he argues that foreign acquisitions will be harder and more expensive in future because:


We ourselves are emphasising that it’s a great milestone.

Jin encourages Chinese firms to look at things from the perspective of the target countries:


Developed countries have had to go through a process of psychological adaption to the emergence of China as one of the world’s great powers. This demands work from us. But this is also a difficult process, since China was weak for a long time, and people aren’t accustomed to the current circumstances. This is a reality China must accept.


In addition, the political system, culture and other aspects of China are quite distinct. Given this, it is very difficult for others to fully approve of China. This is a problem we need to face up to. It can’t be avoided just because it’s a thorny issue. We need to find a more intelligent way to ‘go out’.

4. Chinese firms need to take responsibility for getting their investment proposals approved.

It is worth noting that Jin is unimpressed by what he sees as the excessive caution of overseas governments. He recalls being interviewed by a German journalist who wanted to know whether China was going to buy out Europe. His sarcastic response was ‘You think we can? Thank you very much.’

Yet even here he puts the onus on Chinese investors to deal with the world as it is rather than complaining about how it should be. He is less concerned about protesting against other countries’ investment approval regimes than he is about what Chinese companies can do to convince foreign regulators of their benign intent and minimise risk. As he sees it, ‘as long as any country which receives capital has very transparent rules, laws and gives all the information to the potential investors — what you should do, how you should do it — you should have no worries.’

Engaging with the work of people like Jin — whose authority and seniority as a key member of the political-commercial elite allows him to be blunt about change that needs to be made — is a direct and effective way of keeping up with China’s problems from Chinese perspectives. For people within and outside China with an interest in fostering informed and rational debate about Chinese overseas investment, this engagement is indispensable.



[1] Jin Liqun, ‘China’s Outbound Investment: Risks and Remedies’, Keynote Address, Brookings-Tsinghua Center for Public Policy, 23 September 2013, online at:

[2] Jin Liqun 金立群, ‘Chinese companies going out should talk business when doing business’ 中国企业走出去要在商言商, Harvard Business Review (Chinese) 《哈弗商业评论》17 September 2012, online at:

[3] Lin Boqiang 林伯强, ‘How CNOOC successfully acquired Nexen’ 为何中海油能成功收购尼克森, Dongfang Ribao 《东方早报》, 24 December 2012, online at: