Private push(2)

"The so-called Suzhou model for development was on foreign companies coming and investing in the various development zones around the city. That is how the city's regeneration began 30 years ago.

"Many of our private businesses grew up supplying to foreign companies on these zones. There are also export processing centers there."

Wang said many local businesses are now keen to make overseas acquisitions in their own right and there is no shortage of suitors. The bureau has so far held around six seminars from investment promotion agencies from the US, Sweden, the UK and Japan.

"One of the main problems for companies going abroad is the lack of information and these seminars provide information on investment opportunities. They are very much open to the idea of Chinese investment coming in even though there has perhaps been resistance to it in the past," Wang said.

The ambitions of some Suzhou entrepreneurs go way beyond exporting, however.

Lu Qiyuan, president of the Jiangsu Qiyuan Group, used to be just a steel pipe maker but he now has bigger ideas.

The 48-year-old proudly shows a model of a $1 billion development he is planning to build in Addis Ababa.

If it goes ahead, it will feature a shopping mall, a five-star hotel and a major residential housing scheme on a 500,000 sq meter site.

He makes no apology that it will be a somewhat futuristic addition to the existing architectural lexicon of the Ethiopian capital.

This is no pipe dream development. He has already shown the plans to the Ethiopian Prime Minister Haile Mariam Desalegn, who he said he has met on a number of occasions. Despite not being a developer in China, Lu, who formed his company in 1994, has already built one of the largest Chinese enterprise zones in Africa, the Eastern Development Zone, 30 km outside of Addis Ababa.

It is home to a number of Chinese companies employing African workers and Lu predicts there will soon be between 30,000 and 50,000 people working on the site.

"The China real estate market has been fully developed and this is a new kind of business for us," he says.

"My view of Ethiopia, however, is that you are not working with a company but a country and you are helping that country through its first stages of industrialization."

In Beijing, Xu Hongcai, director of the information department of China Center for International Economic Exchanges, a government research body, said China's private enterprises are now finding it easier to go overseas than State-owned enterprises.

"When State-owned enterprises go global, they often meet with political resistance, but in comparison, private companies are given more leeway and can avoid these political issues and risks," he said.

He also believes that Chinese companies now have greater strength to meet the challenges of going overseas.

"After many years of development, private companies now are stronger in terms of both the capital they have and the talent of their people. They are also much more international in their outlook and have wider horizons," he said.

Peter Nolan, professor of Chinese management at the University of Cambridge and author of Is China Buying The World? insists, however, that Chinese private companies have yet to make major inroads in overseas markets.

"China has not bought the world and shows little sign of doing so in the near future," he says.

"Their presence in high-income countries is negligible. This is a remarkable situation for a country that is the world's largest exporter and its second-largest economy and manufacturer. In other words 'we' are inside 'them' but 'they' are not inside 'us'".

Xu at Jiangsu Dongdu Textile Group admits there are still many challenges and insists that any overseas strategy needs to be thoroughly thought through.

He says this is particularly important when making decisions about overseas acquisitions, which have often gone wrong for Chinese companies.

"We actually have many opportunities for acquisition. Any successful acquisition requires that the merged entities are greater than the sum of their parts," he says.

The biggest destination for China's ODI remains Asia, making up 60.9 percent of the total in 2011, according to the Ministry of Commerce, compared with 54.8 percent in 2004.

Africa, however, remains a steady destination for ODI, accounting for 4.3 percent in 2011.

Lu at Jiangsu Qiyuan Group believes Africa will become an increasingly important ODI destination for Chinese private companies, particularly in manufacturing, because labor costs are beginning to climb in Southeast Asia.

Apart from his investment in the Eastern Industry Zone, he set up a cement factory in Addis Ababa in 2009 and is planning to open a steel company next month.

"Labor rates in Southeast Asia will soon be similar to those in China. We have to pay African workers around a tenth we would have to pay a Chinese worker," he said.

"The fact is that if we buy just one plane ticket for a Chinese worker to Africa and back, it would pay for about five local workers for the year."

Lu said the company has attempted to localize as much as possible to meet workers' needs.

Rui at CEIBS said the main impetus behind Chinese private company ODI over the next decade will not be about low cost manufacturing but about acquiring brands and research and development capability.

China's ODI to Europe has already significantly increased five fold as a proportion from 2.9 percent in 2004 to 11.1 percent in 2011. That to North America, however, has lagged behind, increasing from 2.3 percent to just 3.3 percent over the same period.

"What we have seen so far in terms of Chinese companies moving to low cost centers in Southeast Asia and to Africa and elsewhere is just what happened in China 30 years ago," he said.

"The new and more important trend, however, will be Chinese firms making acquisitions in the European market to acquire the brands, the research capability and management expertise. They want the soft business skills from these markets that they now lack. This, I believe, is very important to the Chinese economy."