SHF2015丨Liang Xinjun

This year the theme of the Shanghai Forumis about Asia's responsibility and innovation. In the past decades, Asia hasbecome a very important growth momentum in the global economy. In the manufacturingfield, China drives the global industrial and economic development; and in thenext decades, Asia will continue to promote global economic development in thefield of consumption. China will become an important capital supplier.

It should be stressed that theentrepreneurship in the "One Belt and One Road " strategy and therelationship between Asia and the world plays a vital role. Chinese enterprisesneed to consider how to focus on the growth of China and how to achieveglobalization in a better and faster way. 

Firstly,based on the logic of the "manufacturing power". In the past, theoverseas investments of Chinese enterprises is mainly in manufacturing, such aspurchase overseas resources, goods, buy local sales network, and even transferproduction line. For these host countries, they are under huge pressure, andface the problem of resources sharing and unemployment. Now, the Chinese enterprisesare no longer relying on manufacturing to go abroad. But from the perspectiveof manufacturing China, we can still innovate the existing mode. At present,the world's commodity transactions are basically at the lowest ebb since 15years ago, which gives China and other Asian manufacturing powers great opportunities.In the slump of commodity transactions, injections and acquisitions areequivalent to sending welfare to the counterpart. So China should seize the opportunityto make a difference in the commodity mergers and acquisitions. In the future,under the ”One Belt and One Road” strategy, Chinese can make more capacityoutput. For other countries and regions in the world, especially Asia, China’soutputs - such as cars, shipbuilding, and steel infrastructure – are precisely whatthe host country desperately needs. Now, there are many Asian countries, thatare similar to China in its early twenty-first Century. They urgently need China'smanufacturing production capacity. Of course, China's investments in themanufacturing industry of United States and Europe are also facingopportunities.

Secondly, based on the logic of the “consumerspower”. Asia's consumption in the future will becomean important driving force for the global economy. From 2007 onward, thegrowth of China's economy is driven by consumption to a large extent. After2012, the rapid development of the middle class in China got the attention ofthe world. There are many industries associated with the lifestyle changes inthe middle class, such as the health sector, which has accounted for 20% - 40%of the world's size. Therefore, based on the perspective of ”Big Consumers”, Chineseenterprises can consider investing in the world's leading consumer enterprises,to help them rapidly return to the Chinese market and benefit from theexplosive growth in the market. This is "the power of grafting the globalresources".

Finally, based on the logic of the"capital power". ODI in China over thepast few years has grown rapidly, reaching $1400 billion last year.China has become a net exporter of capital, and perhaps will make a newrecord this year. China's overseas investment, especially for Asiancountries, is a good news. It is worth mentioning that more than half ofthe Chinese ODI are non state-owned enterprise investment, which arevery flexible and rapid in decision-making. In addition to corporate investment,China's personal overseas consumption investment is also growing,especially in real estate luxury and stocks and other areas. During theprocess, the problem is to merge the internal and external funds, increase theoverseas investment insurance, banking, access to more low-cost capital andlow-cost offshore financial services, compared to the real economy. On onehand, China is the exporter of capital. On the other hand, there are many realeconomies, and their financing costs are two to three percentage points higher thanthat of Europe. Therefore, the key is how to make overseas funds back home torealize the rejuvenation of China. At the same time, Chinese enterprises’overseas investments must let the growth of overseas Chinese, to achievewin-win.

Fosun’s investment strategies include:

Firstly, China power combing with globalresources. We focus primarily on the "healthand happiness" area. Because it is based on the nature of people and the business model focusing on this area can last very long time. Wemainly consider the layout of the ecosystem. For example the"health" area, in addition to medicine, health care, pension,also includes environmental health, a healthy diet, and healthylifestyle. The healthy lifestyle and happiness are inseparable,involving entertainment, travel, fashion and so on. So we have investeda lot of overseas leading companies in this area, and help them togrow in China. This model is a good interpretation of how the worldbenefit from China's development. In the stock market, Chineseentrepreneurs should learn to benefit from the bull and bear markets. Entrepreneurs in the bear market should invest, adjust the structure of assets; inthe bull market, they should focus on financing, reduce the debt ratio,make their net assets solid. From a global point of view, China'scurrent capital market is in a bull market. Capital markets in Europe and the United States are in a bear market, so a good mode is tofinance in China and invest in Europe and the United States markets, sothat you can benefit from both the bear market and bull market.

Secondly, capacity exports. Fosun has exported 1 million tons of steel production capacity toIndonesia, which was welcomed locally. Indonesia is not only lack of steel, butalso lack of highway, wharf, and electric power. These are overcapacities inChina, which can fulfill the urgent need of the Southeast Asia. At the sametime, the ability and speed of Chinese enterprises construction are amazing. Itonly takes two or three years to help the local to make the change and build awin-win structure.

Thirdly, to get low-cost sources offunding and reduce the financing costs. The averagecost of the insurance policy in Europe is 2% lower than the average costof China, and credit is 3-4% lower than China. Therefore, Chinese enterprisesshould not only finance domestically, but also in the OECD (Organizationfor Economic Cooperation and Development ) nation. The financingcost of OECD country is very low, which can improve China’scompetitiveness in real economy.

Finally, I want to offer three suggestionsto the government. I hope they could be helpful to Shanghai and China.

Firstly, the government shouldfacilitate and support overseas low-cost funds of Chinese companies to returnhome and participate in the domestic livelihood, infrastructure, entitieseconomic investment, as well as financing. Specifically,the first thing is to facilitate and improve the approval process ofoverseas insurance of low-cost bonds of Chinese-funded enterprises. The approval process now is very complex and can not be completed in ashort time. It constraints the Chinese enterprises to get low-cost fundsfrom overseas. Second, the government should provide convenience for the overseas Chinese holding institutions to encourage the low-cost fundsto go back to China and be invested in most urgent strategiccooperations, such as health care, pension, environmental protection,logistics, people's livelihood. Finally, to encourage privateenterprises to participate in local PPP (Public-Private-Partnership) constructionaccording to their own industrial capacity.

Secondly, provide convenience forregistration, certification and import of overseas consumer services andmanufacturing upgrading projects of Chinese holding enterprises to encouragetheir coming back to serve for China’s livelihood.

Thirdly, encourage state-ownedenterprises and experienced private enterprise to make overseas investmentsjointly. Encourage the creditor's right of thestate-owned financial institutions top combine the creditor andshareholders rights of private enterprises and make overseas investmentstogether. It can reduce the risk of investment and offer "One Beltand One Road" strategy greater security.