International Acquisitions By China on the Rise

INTRODUCTION
According to the statistics of Chinese Ministry of Commerce, in 2013, Chinese investors made direct investment overseas in 5,090 enterprises in 156 countries and regions. As of the end of 2013, China’s non-financial direct investment overseas totaled US$ 525.7 billion. The number of international acquisitions by Chinese firms has grown remarkably in recent years.
Traditionally, exploiting economies of scope and scale or taking advantage of market imperfections was deemed by firms a dominant way of achieving competitive advantage . However, due to the forces of globalization which have caused economies to become more integrated, there is a realization among firms that these traditional ways of achieving competitive advantage now have only limited profitability. As a result, mergers and acquisitions have become an increasingly popular strategic choice for organizations (Nahavandi and Malekzadeh, 1988; McEntrie and Bentley, 1996; Zhu and Huang, 2007).
On March 28, 2010, Chinese automotive manufacturing company Zhejiang Geely Holding Group’s acquisition of Volvo Car Corporation for USD 1.8 billion (NYDailyNews, 2010). Geely is known as a low cost car maker and the acquisition of Volvo will allow them access to Volvo’s vast experience, acquire advanced technology and managerial know-how, brand image and distribution network. In fact, through acquisition it will help Geely to compete better with other automaker globally and it will allow Volvo to succeed in China automotive market and start making profit.

COMPANY PROFILE
Zhejiang Geely Holding Group
Zhejiang Geely Holding Group privately owned by Chinese automotive manufacturing company that was founded in 1986. Geely launched its auto manufacturing business in 1997...

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...rnment agencies have to buy their car fleets from local automakers. As Volvo is not considered a local automaker, this leaves them out of a market that is potentially worth $15 billion (Yan, Ken).
On the other hand, MG, a British sports brand which is owned by the Shanghai Automotive Industry Corporation, does not seem to have this problem that Volvo faces. The difference in treatment from the Chinese government could be explained by the fact that MG is fully integrated with SAIC, while Volvo is separate from Geely. Factors that affect how the Chinese government classifies a firm seem to depend on where the firm is incorporated rather than where the majority shareholders are based at (Yan, Ken). As such, in order to be fully considered as a Chinese company, Geely would have to absorb all of Volvo’s assets and close the company that is registered overseas (Yan, Ken).