Chinese listed firms speed up overseas biz layout on ＂B& R＂ Initiative

Joint efforts in pressing ahead with "Belt & Road" Initiative

Liu Zhenmin, Chinese Vice Foreign Minister, spoke on the opening ceremony of the ninth Asian Financial Forum that China's "Belt and Road" Initiative is a platform for multilateral negotiation and construction and a "tutti" of China and countries along the "Belt & Road" made to create a win-win situation.

So far, China has signed pacts with more than 20 countries and regions related to the "Belt & Road" Initiative, enhanced cooperation with India in infrastructure construction and facilitated construction of the high-speed rail project of Indonesia as well as the railway linking China with Laos and Thailand, said he.

In 2016, concrete progresses are likely to be made in propelling the "Belt & Road" Initiative as China accelerates international production capacity cooperation and AIIB opened to speed up infrastructure construction.

On January 15, a high-level meeting on promoting the Belt and Road Initiative was held in Beijing. The meeting said that China and its partners will jointly establish an international "economic cooperation corridor" via land by improving infrastructure connectivity while also building a "maritime transport corridor" by linking important sea ports along the route.

China is also cranking up financial supports to the "Belt and Road" Initiative. A rough census showed the Export-Import Bank of China (China Exim Bank) pumped over 520 billion yuan of lending into nations along the "Belt and Road" by the end of 2015, up 46 percent from the beginning of 2015. The bank inked with countries along the "Belt and Road" in 2015 agreements for 500 projects, up 100 percent from 2014 and involving 300 billion yuan of value, up 70 percent from a year ago.

--Overseas business booming

When the "Belt and Road" Initiative is being pressed ahead with more rapidly, domestic enterprises represented by listed firms have escalated their overseas business layout.

As Changjiang Securities holds that as the initiative has been factually implemented and policy-makers' coordinated efforts are gradually presenting policy dividends for businesses, together with the opening of AIIB, a great number of orders brought by the initiative will drag in investment spree along the "Belt and Road".

For instance, China State Construction Engineering Corporation Limited (CSCEC) (601668.SH) announced late on January 14 that its newly-signed contracts in overseas market apparently trumped those in domestic market and these overseas contracts valued 102.5 billion yuan in 2015, up 37.2 percent year on year and evidently better than the 4.9 percent rise of its newly-concluded contracts in domestic market.

In recent two years, CSCEC has seen its overseas business ballooning under the "Belt and Road" Initiative. When having managed to keep growth of areas such as North Africa, the United States, and the Middle East where it boasts advantages traditionally, it set up five more overseas marketing centers in Africa, Latin America, central and east Europe, countries under the Association of Southeast Asian Nations and surrounding areas to broaden its marketing network so as to cover all "Belt and Road"-related countries.

CSCEC is merely a miniature of Chinese listed firms' activities in applauding the "Belt and Road" Initiative, active participation in infrastructure construction and accelerated international production capacity cooperation.

Latest data from China's Ministry of Commerce showed that China's non-financial outbound direct investment (ODI) hit a historical high at 118.02 billion U.S. dollars in 2015, up 14.7 percent from a year earlier and marking the 13th consecutive yearly growth with average rate of growth at as high as 33.6 percent.

By the end of 2015, Chinese businesses' outstanding ODI exceeded for the first time one trillion U.S. dollars. What's noteworthy, their newly-signed overseas engineering contracts value stood beyond 200 billion U.S. dollars at 210.07 billion U.S. dollars in 2015, up 9.5 percent year on year.

Their investment and cooperation with the "Belt and Road"-related countries ran smoothly, led by international production capacity cooperation. In 2015, Chinese companies conducted ODI of 14.82 billion U.S. dollars in 49 countries related to the "Belt and Road", up 18.2 percent year on year and contracted 3,987 engineering projects in 60 "Belt and Road"-related countries, involving overall 92.64 billion U.S. dollars.

They poured 11.66 billion U.S. dollars of their ODI into traditionally advantageous sectors such as transportation, power, and communication in 2015, up 80.2 percent from a year ago. Chinese equipment manufacturing companies reported 7.04 billion U.S. dollars of ODI in 2015, up drastically 154.2 percent year on year. By the end of 2015, Chinese firms are working on building 75 cooperation zones, a half of which are international capacity cooperation-related processing and manufacturing industrial parks. These zones attracted overall 7.05 billion U.S. dollars of investment and 1,209 enterprises to settle, which produced 42.09 billion U.S. dollars of output, paid 1.42 billion U.S. dollars of taxes to governments of host countries and exported part of China's excess production capacity in textile, clothes, light industry, and home appliances industries.

--Multiple means of overseas business layout

China's listed companies have employed multiple means to seize the opportunity, including overseas order intake, cross-border merger and acquisition, project acquisition and establishment of industry fund.

Drawing benefits from the Belt and Road Initiative, many domestic listed companies have received a lot of overseas orders in 2015.

Table 1: Overseas Contract Value of Some Listed Companies

In recent two years, cross-border merger and acquisition has become an important way for listed companies to make overseas layout.

Hengtong Optic-electric Co. (600487.SH) announced on December 2, 2015 that its wholly-owned subsidiary planned to purchase 75 percent stakes of Aberdare Cables Proprietary Limited and 100 percent stakes of Aberdare Holdings Europe BV Limited at a price equivalent to 372 million yuan.

Hengtong noted that through the buyout program, it would be capable of providing a whole set of power solutions for industries such as power transmission and distribution, railways, mining, airports and housing construction.

Besides, domestic companies also get access to the overseas market by project acquisition. China General Nuclear Power Corporation (CGN) signed an agreement with Edra Global Energy Bhd on purchasing the exploration rights of the latter's 13 clean energy projects along with the five countries along the route of the Belt and Road Initiative.

In addition, some listed companies have established industry fund to support the Belt and Road Initiative. China Fortune Land Co. (600340.SH) announced on December 29, 2015 that it planned to invest 39.28 million yuan as the limited partner of Wuxi Financial Investment Co. in taking part in the first phase of fundraise of an industry fund at the theme of the Belt and Road Initiative.