Overseas acquisitions key to growth

China's private enterprises should seize opportunities to make overseas acquisitions to increase their brand value and further enhance their market positions, an official with the country's quality watchdog has said.

The acquisition of overseas brands can be a shortcut for private enterprises to quickly establish a position in offshore markets, said Hui Boyang, deputy chief with the quality management department of the General Administration of Quality Supervision, Inspection and Quarantine.

Hui was speaking to private enterprises on a research tour in Ningbo, Zhejiang province, organized by the China Association for Quality Promotion.

Departments of the central government, especially the Ministry of Commerce and General Administration of Quality Supervision, Inspection and Quarantine, have carried out a string of measures to encourage the country's private enterprises to increase their presence in the overseas market in recent years.

According to the ministry, the country's private sector already accounts for more than 44 percent of the country's overseas investment.

Hui said that the country's manufacturing industries will encounter a bottleneck in their development without research and development investment and a boost in brand value.

"Most of the country's private enterprises in the manufacturing sector grew up as equipment manufacturers. After a period of development, they must build an R&D scheme within them to develop core technology," he said.

But he also warned of the risks of blind overseas acquisitions, adding that an enterprise must conduct adequate market research beforehand.

Gao Bohai, secretary-general of the quality association, also believes that the country's private sector should step up its innovation effort to increase brand value and better establish themselves.

A number of private companies in Zhejiang province have managed to add value to their brands through overseas acquisitions, including Zhejiang Geely Holding Group Co, which took over the Volvo Car Corporation for $1.8 billion in 2008.

Another company, Ningbo's Soundking Group Co, a manufacturer of sound equipment, acquired United Kingdom brands Cadac, Studiomaster and Carlsbro in 2008 and 2009.

About 70 percent of its total sales now come from overseas markets.

Wang Xianggui, president of the company, said he regarded the acquisition of the UK brands as a crucial step for gaining entry to the international market.

"The branding of the products is the key," he said. "Without a recognized brand, the quality of products cannot be recognized by consumers. Without acquisition of the international brands, we can never establish ourselves in the international market," he said.

Fang Bin, vice-president of Oulin Group, a manufacturer of kitchen equipment, also identified branding as the key for enterprises to open the global markets. The company has already established sales networks in more than 70 countries and regions and is looking to further boost the global sales.

Fang also said the employment of overseas staff, including designers and marketing teams, is crucial for the company to increase its global presence.