What a difference five years makes. In a 2017 article, The Economist described Chinese acquisitions abroad as mistimed, nave, and often random (see the link

What a difference five years makes. In a 2017 article, The Economist described Chinese acquisitions abroad as mistimed, naïve, and often random (see the link to the article below). First, let's discuss the mistimed investments. Chinese conglomerates have tried to gobble raw material producing businesses all around the world. That makes a lot of sense as Chinese producers consume a lot of it. However, the largest volumes of this kind of investment took place in the period between 2010 and 2014, when commodities were at their peak of demand and commodity producing firms severely overpriced.   

The second category is an investment in trophy assets with very little industrial logic, such as football clubs, luxury hotels, or yacht manufacturers. These investments might make sense, yet it is most Chinese state-owned conglomerates who pursue them, and they don't provide any sensible synergies (they do, however, provide diversification effects). 

The third category of deals is the least represented, and they consist of investments which make sense on paper, but their success is mostly random. The article mentions the acquisition of Volvo as a success, the acquisition of Motorola not so much. In both cases, the acquirer was, however, a company active in the industry. 

Fast forward to 2021 and the perception of Chinese investors as naïve and inexperienced is gone. In another article from The Economist (again, provided to you in the link below) describes Chinese investors as surprisingly astute. Gone is the drive to buy trophy assets, China has instead emerged as the world's leader in FDI through a very high number of smaller, well-thought-out deals, which mostly concentrate on technology.  

Add the fact that China has moved from catching up with the developed world in some technologies (most notably payment technologies, sharing economy, and face recognition) and the change is still more impressive.  

 

The Economist. (2017) 'Chinese companies' weak record on foreign deals: Overpaying for commodities and trophy assets has become the norm', The Economist, 8 June. Full article here.

The Economist. (2021) 'China Inc's new inconspicuous expansion: Chinese companies are adapting to a more hostile global climate—and thriving', The Economist, 17 July. Full article here.

 

QUESTION:

What has changed and made Chinese acquisitions successful, and what dangers the current trend brings. ?