the US Delighted to Have Chinese Investors

Q: Just a few days ago， Huawei withdrew its application for acquiring the technological asset of 3 leaf under the pressure of CFIUS， and actually this was not the first time for Huawei to fail its acquisition of the American companies. In 2008， it also confronted setbacks when joining with Bain Group to acquire 3com. So how could you comment on Huawei’s deal? What do you think are the most important factors accounting for the failure of Huawei’s two deals?A: In general， for Chinese companies going to the US market， investing in the USand buying American companies， it is a very good thing and helps the American economy a lot. Most of American companies would be delighted to have Chinese investors and some would like to be bought in the commercial terms and almost every American company wants to come to China， too. It is really a good natural thing. But I have been involved several cases where the companies are big and with controversial deals they didn’t work. Rather than talking about the specific deals， what I’d like to say is for the deals that are rather slightly controversial， slightly sensitive or very large scale which got the public attention， whether in China or in the US， most of the companies stopped the transaction， that’s all they do， according to my experience. You know I represented at least 50 US companies coming to China and a number of Chinese companies going to the US including Huawei. I think on one hand the companies have to do transaction and on the other they need look at the social and political environment and prepare for that. For example， a company like Petrol China or other companies almost invested everywhere in the world， but in the US， two parts of US Congress， Black Caucus and Christian Right Coalition opposed to invest in Sudan. The issues like that become issues. Actually most of the deals were successful and only a small share of the deals failed and became the target of the media.The Chinese companies which are going to invest in the US should know that， and they should really know what the political environment in the US is and the way to do that is to hire some experts in the Washington law firms， who really know the US congress， the legislation and understand what the sensitive issues are. And the second thing is to handle it. For example， I represented a Chinese company last year， which wanted to invest in an American technology company. Almost every technology company in the US， except the very large ones， lacks capital. So companies in the US are very happy to see the Chinese investors. But first we went to see the mayor of the city which the Chinese company was going to invest， see the local city councils and the senator of the state to explain what and why we are doing， and what we got was a very warm welcoming response. Q: You mentioned that you have done a lot of work in the Chinese investment in US companies， particularly small and mid-cap technology companies. In the cases you have dealt with， what’s the percentage of the success for the deals? What can the Chinese companies earn from those successful deals? Could you illustrate it with a typical case?A: I and my company have helped hundreds of Chinese and US companies carry out the transactions. According to my experience， actually most of the deals were successful. Around 90% of deals I help proceed were successful. However， these deals are usually not the focus of the media because the success stories rarely make the newspapers. But the problems or difficulties usually would arouse people’s attention. So people easily put more focus on the ailed cases and would hesitate to act for exploring opportunities. Actually there are many investment opportunities for Chinese companies to tap. Let me give some examples.A good opportunity lies in the American small and mid-cap technoogical companies. In telecommunication sector， medicare， environmental protection technology， water cleaning and clean energy fields， the US has many small and mid-cap technological companies with great potential in San Francisco， Seattle， San Diego， Boston， Denver etc. They want to come o China， to find partners in China， as China naturally is a huge market. However， they lack capital or they have some difficulties to enter a market which they don’t understand much， so hey need investors to help them. The nvestors can be independent individuals， private companies， state-owned companies， institutions， investment unds， etc. Any form is OK as long as t is legal. There can be many forms of cooperation: stock swap， joint venture and licence authorization etc. Actually icence authorization is a very effective cooperation form. The companies can， hrough the mutual license authorizaion， explore the market in China and n the USA， and they also can join ogether to tap other markets， such as he market of India and Latin America etc. Another effective way of cooperation is to establish investment funds， which is run by the Americans. And the Americans work with Chinese companies to find the right American companies for investment. In fact， there are tens of millions of such small and mid-cap technological companies in the US， for instance， there are more than 10 thousands of this sorts of companies in San Diego alone. Chinese companies can find them through the local business associations. For example， in San Diego， there is a business association called CONNECT. Most of their member companies are small and mid-cap technological companies in bio-technology， telecommunication and internet fields， which are eager to develop their business in China.Another case is the movie and media industry， which also has opened their door to the Chinese companies. Now China has many excellent TV plays and Movies such as the TV play Lurk (Qian Fu pronounced in Chinese) and the movie Dulala’s Promotion. In the US， a large portion of TV programs come from other countries such as the UK， France etc. If those Chinese TV plays and movies can be released in the USA， as long as there are subtitles， they would win great popularity. Many companies in Hollywood had great interestin this， but they don’t what to do， which I mean， it is somewhat difficult to find the right entry point for them. Two years ago， we had cooperated with our partners in Shanghai and brought Shanghai Oriental Art Center’s stage drama onto Broadway successfully. It is believed to be the first time for China’s stage drama performed at the stage of Broadway. It was a great success. I believe the open American market would provide vast opportunities to Chinese investors.Q: How do you comment on China’s development in last decade since China’s entry into WTO? What do you think is the most impressive achievement that China has made during the period?A: China has transformed its GDP up at least 4 times， imports and exports up at least 90% and the impact on China’s economy has been very huge. Almost all the major Forturn500 companies are in China. Just look around at the scale of development. It is the entire part of the east coast area and there are also many other places such as Chengdu， Wuhan etc and they have gone over from being not particular worldward to really being worldward now.I am not only impressed by the massive change， but also by the pace of the change， which is accelerating so fast， especially in the last two or three years. These are incredible achievements!The challenge is that we still don’t understand what’s going on here. For most Americans， China is still a poor country and they don’t realize these great changes. I think it is very important for the Chinese companies to go abroad， and it is important to bring the culture abroad. It is critical from the strategic view as we need to know each other.Q: We learned that your company was prepared to establish a US SMEs center which is aimed at helping the technology export of American SMEs in the new energy field to China and promoting the cooperation between Chinese and American businesses. Could you tell us more about the Center? How is the Center progressed now?A: From what I know， there are many economic zones and technological cluster centers in localities in China. For example， I just visited a technological cluster center in Nanchang， Jiangxi Province. The center enjoyed preferential policies，grants and tax breaks and other supports from the local governments etc. and the most important thing is that there would be sufficient capital for the companies there. I know there are many such kinds of clusters nationwide. That’s also one reason why I want to establish an American SME center. This program is aimed at helping the American SMEs in new energy field export their technology to China and promote the cooperation between the Chinese capital and the US capital. Now we are still preparing for the establishment of this Center.Q: What do you think of the Chinese investment in the US companies in future? What are you suggestions for the Chinese companies whichplan to invest in the US?A: Now I would say Chinese companies now have great opportunities in investing the US. It is important that it is on the strategic level. There is a floor of the US-China relations， and that floor is the two economies have become more and more intertwined， from the strategic perspective. But the second issue is that before we had capital and China didn’t have capital， we had technology and China did not have technology， but now China has money， has some very good technology and there is a very good fit—the US companies need money and need the market， but they can’t do a lot by themselves. It should be a much more win-win situation. I think there are tremendous opportunities， and the way to do it is that not only going to the Washington D.C. and encountering the Congress but going to San Diego， Denver， Seattle， San Francisco， and a hundred American cities， which have unlimited opportunities.For the companies which plan to invest in the US， I suggest that:First， they should try to keep away from the sensitive sectors， which is the safest way.Second， the companies should really understand the social and political system and environment and prepare for that， which I have mentioned above.Third， the companies should try to understand the local social， political and cultural rules， not only rules but also the hidden rules. For example， we never talk about the weight and appearance at the business table. We would never say that“that girl or woman is pretty，” at the business table， and if so， you would be thought to lack education. Another example is about the labor law in the US. It does not permit the recruitment requirement of“at least 1.6m tall and good looking”， however， it is permitted in China， at least permitted in the airline companies in China. Actuall， it is not only a matter of breaking the law in the US， but this requirement will upset the US public and this will damage the image of the involved company. However， many Chinese companies have no idea of that. To understand the environment and the rules even the hidden rules will help the Chinese companies win over trust from the US partners because they would think that it would do favor for the cooperation afterward that you learn their rules and operation. The companies should pay much attention to the details as one saying goes， “the devil is in the detail”.Fourth， the company must find the right partner. The reason for failures of many cases lies in the two companies lack common goals and expectation. That is having different dreams at the same bed. So it is very important to find the right partner， which would do great help for the success of the deal.Fifth， it is not necessary to buy the entire company once. And it would be better to buy 10% or 20% of the company and then gradually buy more with learning more about the operation of the company. Besides， the company should try to help the cooperated foreign company enter the China’s market by setting up subsidiaries or finding the Chinese partners， hiring Chinese staff and understanding the local market.Sixth， the company which plans to invest in the US just go straight to the heart of the US society. I mean the company should find the American law firms or lobby group which have deep understanding to the rules and hidden rules for help to prepare the deals. It may produce undesirable results by resorting to some Chinese Americans who are claimed to understand the US society.Seventh， don’t just focus on Washington D.C. Actually many states in the US are very business friendly and offer many opportunities.