China Business

Our First China Hummer Post: Our Silence Said It All.

China cars

Virtually every week, somebody emails or calls one of our China lawyers with the perfect (usually distressed) company they want us to pitch to “all the people” we know in China. I have even gotten calls from government agencies asking what they should be doing to lure Chinese businesses.

Here is what we are seeing.

Chinese companies looking to buy American companies are usually looking for a valuable technology or commodity or, to a much lesser extent, a strong brand name. If the company you are pitching has neither, the chances of a Chinese company buying it are slim. People have told me Chinese companies “must be” interested in companies with really good marketing people. They tell me Chinese companies are terrible at marketing and so they obviously will be buying American companies good at it. That’s true in theory, false in reality.

There are a few oddball purchases and foreign direct investments out there, such as the wealthy Chinese businessperson who owns a Chinese company and wants to buy an American company so his son or daughter can go to UCLA. These purchases tend to be more random.

There is also Haier. Though I am convinced Haier’s setting up production in the United States will be a money losing proposition for many years, I still think it brilliant. I believe Haier came to the United States despite the bottom line. I believe Haier came to the United States so as to minimize export/import risk in the long term, so as to improve its reputation in the United States, so as to learn from the United States, so as to improve its marketing in the United States and the West and so as to be better perceived in the United States. In other words, it did what Toyota and Honda did when they built US car plants back in the 1970s. This sort of prescience from a Chinese company has so far been vary rare, but I do see it slowly increasing.

Which brings me to Hummer.

I can see a Chery buying Volvo to increase company prestige and to improve their in-house technology. I just never believed a Chinese purchase of Hummer would get Chinese government approval because I never thought it made sense. I see no logical reason for a Chinese company to buy Hummer with the intention of keeping its production in the United States, especially when the buyer is a Chinese company not even in the auto business. I therefore never bothered to write about it until now because I did not see it as having much import.

It has now become pretty certain the China deal for Hummer is a non-starter.

I just do not see it. Do you?

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