FLYING ABROAD: Hannes Androsch (left), Chairman of Future Advanced Composite Components, and Meng Xiangkai, President of Xi'an Aircraft Industry (Group) Co. Ltd., shake hands at a signing ceremony in December 2009. Xi'an Aircraft has agreed to purchase a 91.25-percent stake in the Austrian aircraft maker (LIU GANG)

Overall, Chinese companies were responsible for 38 overseas M&A deals in 2009, with a combined value of more than $16 billion, soaring 90 percent from 2008, according to data from Beijing-based Zero2IPO Research Center.

The buying spree comes amid the unprecedented global recession that forced multinationals to ease back on expansions. According to data from Thomson Reuters, global M&A deals were valued $1.97 trillion in 2009, diving 32 percent from a year earlier.

The wave is driven partly by the Chinese economy's thirst for natural resources. On August 18, 2009, Sinopec agreed to pay $7.56 billion for Addax Petroleum Corp., an oil producer listed in Toronto and London. The deal was the largest outbound investment made by a Chinese company to date.

China Investment Corp. (CIC) is also jumping off the sidelines. Making a swift comeback, the scarred sovereign wealth fund last year notched up a 14.5-percent stake in the Noble Group Ltd., a Hong Kong-based trading firm, and a 17.2-percent interest in indebted Canadian miner Teck Resources Ltd.

China has many incentives to keep playing the M&A game. Chinese firms now have the cash to cherry-pick beaten-down foreign assets, while many beleaguered global giants have no other choice but to detach themselves from failing businesses. Acute overcapacity at home, as well as the likelihood of further appreciation of the yuan, are also among the forces gradually pushing Chinese capital offshore. Most importantly, the prospect of laying a cross-border foothold is truly tantalizing for any Chinese company that harbors ambitions of becoming a global player.

Wanting to secure long-term resource supplies, policymakers have recognized that going out is a more promising economic strategy than staying at home. The Ministry of Commerce earlier last year loosened controls on overseas investments and simplified application approval procedures, vowing better financial services for firms expanding globally.

Expansion-minded Chinese companies are hunting down opportunities before the recovering prices put their target assets out of reach, said a report from the accounting firm PricewaterhouseCoopers (PwC).

PwC predicted the country's outward M&A deals will increase a robust 40 percent in value in 2010 given the strong desire of Chinese companies to expand internationally. While deals for energy and resource supplies will continue to dominate, larger Chinese private enterprises are looking for intellectual know-how and access to foreign markets, said the report.

Global ambitions

With the Western world still mired in the recession and the Chinese economy firing ahead, the tide of resource acquisitions has added to the growing sense the global economic axis is shifting eastward. But the slick prospect is somewhat overshadowed by the fact that no Chinese brand has enjoyed global recognition. Lenovo and Huawei are among the best-known Chinese companies outside the country, but neither is in the same league as Dell, Apple or General Electric.

Past experience involving internationally recognized brands has shown that acquisitions can be a convenient route onto the global stage. Japan and South Korea were synonymous with cheap shoddy goods decades ago, but now are cutting-edge manufacturers of automobiles and electronics. Their companies received a lift from acquired technologies and management expertise while venturing abroad. Such brisk growth could provide a powerful catalyst and some confidence for Chinese companies to also take the plunge.

Nevertheless, while Chinese firms expand, their investment success is far from guaranteed. Managerial expertise and cultural sensitivity needed to build a global footprint with operations and brands spanning the globe cannot be achieved overnight. And quite often, targets that enter their cross hairs are too big to be easily run by Chinese managers with little cross-border experience.

Even Lenovo, China's top PC maker that acquired IBM's personal computer unit in 2005, has been forced to refocus on the domestic market in the face of spiraling losses in North America. The home appliance giant TCL also had to wind down its loss-making European handset businesses acquired from French telecom maker Alcatel in 2004.

Other Chinese companies are learning lessons from Lenovo's and TCL's shortcomings—many have proceeded with outgoing forays by steering clear of the risky financial sectors or acquiring a minority stake in their target company. CIC, for instance, stepped up a massive talent hunt for commodity-related management vacancies before scooping up resources overseas.

After taking over several European rivals and German technologies, China International Marine Containers Group hired foreign executives to run its European operations. This localization helped bridge the culture and language gap and led to a leap in productivity, allowing the company to cut the time it took to make containers from 20 minutes to about five.

In another move, Beijing Automotive Industry Holding Corp. (BAIC), inked an agreement with GM to pay $200 million for intellectual property rights to 9-5 and 9-3 Saab sedans. The deal came as a boost to the Chinese company in pursuit of its own brand models, and is expected to save BAIC five to six years of research. And unlike taking over the withering brand as a whole, the technology acquisition is believed to be a much safer and cheaper alternative.