China pushes firms to shop for famous global brands

BEIJING Mon Mar 7, 2011 7:42am EST

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BEIJING (Reuters) - China wants its firms to buy top global brands as a short cut to improving their reputations, the commerce minister said on Monday, one of the clearest messages of official support yet for a strategy of high-profile foreign acquisitions.

Despite growing riches and dominance of their home market, most Chinese firms have struggled to secure a foothold abroad. A lack of name recognition has stunted their organic growth and political obstacles have stood in the way of major deals.

In a statement at China's annual session of parliament, Commerce Minister Chen Deming made clear that Beijing would back more aggressive efforts by firms.

"We will encourage the best firms to acquire or build up overseas operations and to license or acquire famous global brands in order to obtain international recognition and improve the image and competitiveness of Chinese products," he said.

Chen's comments do not mark a new departure for China because the government has already been nudging its firms to venture abroad, but his tone was striking, analysts said.

"Although they have always been supportive, it is the first time that they have made their position known so clearly," said Cao Xuefeng, head of research at Huaxi Securities in Chengdu, a southwestern city.

Consumer goods firms could be major targets of this push, because brand value is very important in such sectors, Cao added.

But Mei Xinyu, a researcher in a think-tank under the commerce ministry, downplayed the significance of Chen's message.

"Actually, the government has been moving in that direction for a while, which can be seen in its financing support and relaxation on rules governing capital outflows for firms going abroad," he said.

MIXED RECORD

So far, China has had a mixed record in its attempts at overseas acquisitions.

Automaker Geely bought Ford Motor's Volvo car unit last year and Lenovo Group (0992.HK) purchased IBM's (IBM.N) personal computer business in 2004.

Sports utility vehicle maker Great Wall Motor Co (2333.HK) is in talks about a potential tie up with Jaguar and Land Rover, two top-line global brands that make up a unit of India's Tata Motors (TAMO.BO).

But several Chinese acquisition attempts -- notably, offshore oil specialist CNOOC's (0883.HK) interest in Californian rival Unocal -- have foundered after meeting political opposition.

And the Chinese government has at times appeared to block private deals, refusing to give a green light to unlisted Tengzhong, a little known Chinese machinery maker, to acquire General Motors' gas-guzzling Hummer brand.

(Reporting by Aileen Wang, Koh Gui Qing, Soo Ai Peng, Farah Master and Langi Chiang; Editing by Neil Fullick)

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