COLUMN-China Inc. takes stock after overseas buying spree

-- Wei Gu is a Reuters columnist. The opinions expressed are her own --

By Wei Gu

HONG KONG, Jan 21 (Reuters) - Abundant liquidity, government support and a strong yuan fuelled Chinese companies' overseas buying spree.

But since they went out at the peak of the market and did not have a clear strategy for acquisitions, it should come as no surprise that most of those deals have turned sour.

Once bitten, twice shy.

Crisis-ridden companies around the world are hoping that cash-rich Chinese buyers will come to their rescue, but the Chinese are not eager after getting their fingers burnt.

Chinese regulators are now giving more scrutiny to foreign deals, forcing interested buyers to lay out the most pessimistic scenario when seeking their approval.

Bankers said Beijing is sceptical about buying everything except resources, which is seen as important to China's strategic interest and involves few integration challenges.

BUYING THE BRAND

Chinese manufacturers thought they had found a winning strategy by making goods cheaply in China and slapping a prestigious Western brand on it.

But the strategy hit a wall as companies such as TCL (000100.SZ) struggled for years to turn around businesses it bought in North America and Europe.

Lenovo's purchase of IBM's PC unit was widely lauded as a rare success until it announced a broad restructuring and profit shortfall earlier this month.

The acquired unit has a high exposure to large enterprises in developed markets, a segment that was hit hardest by the economic downturn, said Xin Zhao, an analyst at Cazenove.

"Before China caught the globalisation wave our teachers in the West ran into problems," said Yang Mianmian, president of China's electronic appliance giant Haier (600690.SS) which last year spurned an offer to buy GE's (GE.N) electronics unit.

"The financial crisis has changed our thinking and now we are looking more at rural demand."

One of the potential pitfalls has been overpaying. Chinese buyers lack experience in valuation methodology and are at risk of paying too much. Moreover, they often do not have a strong understanding of the target experience, and tend to underestimate culture differences and powerful unions.