On December 4, People's Daily, China’s most influential daily newspaper, published an article - Recognition Shall Be Received both at Home and Abroad. This article has cited two cases of Fosun’s overseas business expansion in recent years. The first case is Fosun’s successful investment and operational upgrade of Club Med.Secondly Fosun successfully initiated its overseas commercial bank - Millennium BCP to work with China’s UnionPay for tapping into the Portuguese market. Therefore, the cases showed the innovative ways for Chinese enterprises to go global and respond to the Belt and Road initiative. It also emphasized that “going out” plan cannot be fully implemented without the domestic policy support and guidance, and the internationalization process without domestic foundation won’t go further. Story is written by reporter Wang Guan and the excerpt is translated below:
According to 2017 World Investment Report by the United Nations Conference on Trade and Development, Chinese foreign direct investment in 2016 accounted for 13.5% of the global flow of the year, ranking second among the countries (regions) worldwide, and the stock of the year end jumps to the sixth place.
In recent years, more and more Chinese companies start "going out", which has become a new scenery line of the global market. However, some enterprises’ investment in foreign countries involves blind and irrational behaviors which are hard to sustain. This has triggered close attention from the market and regulators. At present, the scale of Chinese enterprises "going out" has been considerable, but how to achieve high levels of foreign investment remains the key for future development.
In June this year, Club Med’s Opio Resort reopened near Nice, France. According to the introduction of Henri Giscard d’Estaing, Chairman and CEO of Club Med, at the opening ceremony, Club Med’s profit in 2016 achieved a year-on-year growth of 36%. Such a good result was attributed to the efforts of Fosun International Limited. After successfully privatization of Club Med, Fosun International strived to achieve the team stability and enabled the strategic transformation and successfully implemented the changes in every aspect.
Guo Guangchang, Chairman of Fosun International said that, “The more in-depth cooperation between Fosun and Club Med will create enormous value for both sides. As tourism has become one of the fastest growing sectors in the Chinese economy, we will bring more growth momentum from China to Club Med.”
Rapid development of overseas investment is one of the remarkable achievements of China’s economy in recent years.
It can be seen from 2016 Statistical Bulletin of China's Outward Foreign Direct Investment issued by the Ministry of Commerce that the annual average growth rate of China’s outward foreign direct investment from 2002 to 2016 has reached up to 35.8%, and the global share has increased from 0.5% in 2002 to 13.5%, reflecting the increasingly prominent position and role of China in the outbound foreign direct investment worldwide.
Behind the dazzling achievements are various efforts of domestic companies, both in positive and negative meaning. Some enterprises take advantages of the “going out” strategy to develop and grow their brands actively; however, some are involved in undesirable foreign investment behaviors.
For example, some domestic steel plants acquired overseas catering enterprises; some borrowed money for overseas acquisitions, though with very high domestic debt ratio; also, in recent three years, Chinese enterprises have acquired 15 overseas football clubs on a shopping spree, to name just a few. The investment behaviors of some enterprises are not only deficient in truthfulness and compliance, but also inconsistent with China's industrial policy requirements of encouraging investment in foreign countries, and even exert a negative effect on national image.
"Investment is just a means; its fundamental purpose is to pursue great industrial depth and technology level, and improve an enterprise's own capabilities while meeting customer demands.”
"Going out" aims for better “bringing in” - the internationalization process without domestic foundation cannot go far and steadily.
According to Liu Ying, a researcher at Chongyang Institute for Financial Studies, Renmin University of China, investment hot spots keep increasing in recent years and each country competes to attract foreign investment. It is necessary for our country to strengthen the guidance in "going out", but the combination of "going out" and “bringing in” is also critical.
The Reports of the 19th National Congress of China’s Communist Party have suggested that we should pay equal attention to "going out" and “bringing in” with the Belt and Road construction as the focus, following the principle of achieving shared growth through discussion and collaboration, strengthening innovation capabilities and open cooperation, and bringing about a new phase of all-around two-way opening up with links running eastward and westward by land and sea.
Guo Guangchang, Chairman of Fosun International, said that, “‘going out’ aims for better ‘bringing in’. We not only make our own global expansion, but also hope to positively respond to the Belt and Road initiative and help more Chinese enterprises ‘going out’ on the basis of the global resources accumulated by us."
Recently, BCP invested by Fosun has reached a strategic cooperation agreement with UnionPay and both parties will have worked out UnionPay card issuance, innovative payment and promotion, etc. in Europe. This is a successful practice of Fosun to help the Belt and Road initiative and Chinese enterprises with their global layout.
The results of "going out" are closely related with domestic environment.
Insiders believe the internationalization process without domestic foundation cannot go far. Although some projects depend entirely on foreign investment and their own overseas funds, ultimately, the sources of guarantees for overseas projects are domestic parent companies. Also, foreign banks only provide loans and financial support according to the operating performance, strength and reputation of the domestic enterprises.
In the first half, Chinese companies’ new investment in regions along the Belt and Road has increased by six percent compared with the same period of last year and the regional optimization has been realized in investment in foreign countries. The fields of investment in foreign countries mainly cover leasing and business services, manufacturing, wholesale and retail trade, information transmission software and information technology services, which indicates that the industry structure of China's investment in foreign countries has also been optimized.
Steady and positive "going out" is not possible without policy support and guidance.
To control the excessively rapid growth of outbound foreign investment in fields such as real estate, hotel, cinema, entertainment and sports clubs in recent years, the relevant regulatory authorities have provided risk prompts and adopted a series of policy guidance.
According to Guo Guangchang, Chairman of Fosun International, “Capable government ensures effective market. The stable, predictable and more transparent and fairer policies can support real and legal foreign investment in line with the national strategy and guarantee long-term and healthy development of companies.
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