Chinese companies dominating international business with its overseas investment and expansion plan

The international business news is once again dominated by Chinese companies’ overseas investment and expansion plans. Chinese textiles group Ningbo Shantex Co Ltd which manufactures and exports textile accessories likely to make a takeover bid for United Kingdom-based apparel chain Phase Eight.

Shantex is already in preliminary talks with Towerbrook, a private equity company that bought Phase Eight in 2011. Phase Eight was established in 1979 by Patsy Seddon in London to offer fashionable clothing to sophisticated young suburban mothers.

It designs its clothes in-house. The company has 108 stores and 196 concessions in the UK and 62 more internationally, including in Switzerland, Germany, Sweden, Singapore, Australia and the United Arab Emirates.

Phase Eight posted an operating profit of 18.6 million pounds ($21.2 million) in the year to Feb 1, 2014, up marginally on the 2013 result.

The take over of Phase Eight by Shantex would represent its first acquisition of a major overseas retail business, reflecting an increasing trend for Chinese companies from all industrial sectors to pursue offshore takeovers.

Chinese companies announced 79 takeover deals in Europe in 2014. The media have focused on the implications of such moves for foreign companies and markets, but little attention has been paid to the fusion of different business cultures and the benefits this will bring to Chinese industry.

The benefits of foreign investment have been well documented; especially the “multiplier effect” of foreign capital on economic growth in the earlier phases of China’s opening-up.

In coming years, a “reverse multiplier effect” will be seen, where fast-rising Chinese overseas investment and expansion result in a large injection of international business cultures and styles. They will only expedite the much-needed business modernization process in China which will help ensure a soft landing for the economy as well as a sustainable economic path.