In this article we present an easy to understand analysis of the difficulties that Chinese enterprises will face in overseas acquisitions of large companies in 2014, and offer measures for dealing with them.
On 21 January 2013, CNPC proposed to acquire Exxon Mobil’s Iraqi oilfield project for US$50 billion. On 29 May, Shuanghui International announced that it was acquiring Smithfield, the world’s largest pork producer and processor, for US$7.1 billion.
Due to the fact that the great majority of the assets of Chinese enterprises are in China, even if they are very profitable, most of such profits are invested into reproduction, making it difficult for them to use their own funds to pay for such large acquisitions.
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Jonathan Sun is a partner at Zhong Yin Law Firm in Beijing. His contact tel is +86 10 5869 8899; Email: sunjian@zhongyinlawyer.com