Shrinking European demand and rising protectionism are leading Chinese firms to turn to domestic markets, the head of Fosun International, China's largest private conglomerate, said on Monday. While others look to home, Fosun is planning to tackle the issues faced by Chinese firms in Europe by establishing a new investment platform in the European Union -- which, with 500 million people, is the world's largest trading bloc.
Fosun has interests in pharmaceuticals, mining and real estate and recently announced plans to spend up to $2 billion to buy financial services companies as it bets on China's domestic consumption booming in the coming years. Fosun's Chief Executive Liang Xinjun said Europe's generally lacklustre growth and increasing urge to raise levies on certain imports from China had made it all the more pressing to develop markets among China's 1.3 billion people.
'The challenge is in the weakening of demand coupled with protectionism in Europe,' he told Reuters on Monday. 'Most Chinese companies have noticed these problems so the first thing to cope with is to sell products on the domestic market,' he said, speaking through an interpreter at the Global China Business Meeting.
As the European Union began to rebound from recession this year, China has seen booming exports of car wheels, electronics and construction materials. At more or less the same time, the EU began imposing import tariffs on a range of Chinese goods. The EU denies it is being protectionist, saying it is taxing Chinese imports that are illegally priced and subsidised.
Liang rejected moves by European policymakers to challenge the legality of Chinese state subsidies, including cheap bank loans and preferential property leases. 'This is nonsense. We Chinese companies don't receive anything. There are no subsidies for the steel sector,' he said.
Fosun, founded in 1992 by Liang and three other graduates of Shanghai's Fudan University with initial capital of $4,000, is now worth $5 billion with five main businesses: pharmaceuticals, real estate, steel making, mining and consumer services. Besides focusing on China's domestic market, Fosun aimed to set up operations in Europe in the hope of avoiding high EU duties, Liang said.
'We want to establish an investment platform in Europe, to better access the market,' he said, adding Fosun was in talks with an EU private equity firm 'with great knowledge of the local market' to find acquisition opportunities in the leisure, luxury goods and pharmaceuticals sector.
Fosun aimed to buy pharmaceuticals companies in the EU to co-develop generic drugs and sell Fosun's own diabetes drugs, liver treatment and other medicines directly in the EU, he said. Liang has in the past predicted China will become the second- or third-largest drugs market globally within five years, following similar strides in luxury goods, automobiles and financial services.