SHANGHAI - Squeezed by the appreciating yuan and rising wages, factory owners in Wenzhou of Zhejiang province are looking overseas to find higher returns for their fortunes amassed by exporting a range of consumer goods.
In doing so, they are turning the strong domestic currency to their advantage. Wenzhou is so flush with cash that the city government is only too happy to help with the outflow of capital. Wenzhou merchants made quite a few highly publicized European acquisitions to take advantage of the euro's weakness against the renminbi.
The euro has depreciated more than 20 percent since the start of the sovereign debt crisis in Greece in October 2009, prompting many European governments to adopt austerity programs that cast a cloud over their respective nation's economic prospects.
The resultant opportunities to buy valuable European assets at attractive prices have not gone unnoticed by the merchants in this entrepreneurial hotbed along the coast in East China. Huang Xiangxun is one such merchant.
In June, his 21-year-son, Huang Hao, in England, made headlines in Zhejiang by acquiring a 45 percent stake of the bespoke furniture maker ES Group of London for 100 million yuan ($15.14 million). ES Group, one of the world leaders in staging arenas, project management, logistics and transportation, with annual sales in excess of $200 million, won contracts for fitting the stadiums of the Sydney and Athens Olympics. It is a reported to be a frontrunner in the bidding for the contracts from the organizing committee of the London Olympics in 2012.
The purchase of ES was made by HEB Group, a company headed by Huang junior. HEB is a London subsidiary of Shanghai-based Haobo Chair, controlled by the 48-year-old Huang senior. The acquisition, when it goes through, will make Haobo the largest single shareholder of the British company. Haobo, one of China's largest manufacturers of sports equipment, had landed a contract worth hundreds of millions of yuan at the 2008 Beijing Olympics.
"The acquisition (of ES Group) will greatly help Haobo to win more deals related to projects for the forthcoming 2012 London Olympic Games," said Huang senior. Huang's latest venture in England was cited by the Wenzhou government as an argument for introducing the ill-fated overseas investment rule, which was said to be aimed at creating a regulated overseas investment channel for individuals, encouraging private investors to take part in international commercial cooperation and liberalizing the city's economy.
"The repeal of the rule won't affect the cooperation between my company and worldwide clients, because most of the joint projects we're involved in are business instead of personal investments," Huang said.
Haobo Chair supplied and installed 6,000 VIP seats at the National Stadium for the Beijing Olympic Games and has won a contract from the London Organizing Committee for the Olympic Games (LOCOG) to supply 20,000 seats for the Aquatics Center built for the 2012 London Olympics.
"The financial crisis hit British companies hard, and LOCOG has a tight budget," Huang senior said. "That's why ES turned to Chinese companies like us with lower manufacturing costs," Huang said.
The company is currently negotiating with LOCOG on other Olympic-related contracts worth more than 2 million pounds ($3.17 million). The equity investment in ES, which is more experienced in management and business strategies in the British market, "can bring us more opportunities from the London Olympic Games," Huang said. "Our target is to achieve business worth more than one billion yuan."