China on its way to buying the world?(2)

Chinese property magnate Wanda swung into the entertainment market by buying AMC Cinemas, the second-largest cinema chain in the United States, three years ago, and is reported to be in talks with Hollywood film studios Lions Gate Entertainment Corp. and Metro-Goldwyn-Mayer Inc. for stakes.

Wanda's billionaire chairman, Wang Jianlin, has good reason to diversify the company's investments. China is increasingly urban, hungry for entertainment and able to pay for it. More and more acquisitions will be driven by the needs of this growing class of ever-more sophisticated consumers, rather than just the needs of resource-hungry state-owned enterprises.

Chinese overseas investment had primarily focused on natural resources until recently, but targets have become more varied as China undergoes industrial upgrades to move up on the global industrial value chain.

Overseas investment in construction, culture, sports and entertainment grew the fastest among all industries in 2013. Investment in the service industry grew 27.1 percent last year, accounting for 64.6 percent of overall investment.

NEW MARSHALL PLAN?

Chinese offshore investment will reach 1.25 trillion US dollars over the next decade, Chinese President Xi Jinping told the APEC CEO summit November in Beijing. That would almost triple Chinese outbound direct investment in the next ten years.

With four trillion US dollars in foreign exchange reserves and continuous supportive policies such as the "One Road and One Belt Initiatives," the potential for a much larger flow of outbound investment is enormous.

"The booming ODI is mainly driven by Chinese firms' growing ambition and hunger for new opportunities and countries' thirst for investment, and it is facilitated by the government's supportive policies," Shen said.

"Therefore, this is not a government-pushed 'Marshall Plan' as speculated," Shen added.

Despite remarkable progress in overseas investment, China still has a long way to go before becoming a more sophisticated capital exporter like the United States and Japan.

US overseas investment capital flow reached over 330 billion US dollars and Japan's neared 140 billion in 2013, while China's just topped 100 billion last year.

Of course, the path is not free of obstacles. Lack of trust with local stakeholders, fierce competition from local and Chinese counterparts and ignorance of the local regulatory and cultural environment have caused trouble in overseas investments and operations, according to Wang Huiyao, head of the Center for China and Globalization, a Chinese think tank.

It requires careful homework and cooperation with government, professional third-party agencies and qualified international talent to be a competent and responsible buyer, Wang added.