China, Europe and the Netherlands: Opportunity Is Knocking at Our Doors

Apr. 2015 
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Polar bears are running out of safe places.
Go to www.ifaw.org to learn more.
Can you imagine…
the Arctic without polar bears?
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From old patterns to the new normal: still the 
most attractive investment destination
The global economy is currently undergoing a period 
of reconstruction: old patterns are being shattered and 
banished forever, and new patterns must urgently be 
established. The path ahead is hardly clear-cut. Amidst 
this sea of uncertainty, however, one thing is already 
unmistakably clear: China will play a leading role in 
this new world order.
As the world’s second largest economy and its fast-
est-growing consumer market, a transitioning China 
must effectively attract high-quality products, brands, 
resources and management to service its domestic 
market and consumers. Having relied on the expan-
sion of China’s home market for the last three decades, 
a growing number of Chinese businesses need to 
expand abroad. Experiences so far have found that 
mergers and acquisitions are the best way to expand 
capabilities.
Both “going out” and “attracting in” offer a historical 
opportunity to further integrate China into the global 
economy. Competing on the world stage with industry 
leaders is the only real way in which Chinese compa-
nies can truly develop their strengths. More crucially, it 
requires them to apply possible capital strengths, and 
enhance the innate dynamism of China’s economy.
Over the last year or so, the Chinese economy has 
found itself facing a dual challenge. First financially, 
the challenge is the country’s economic slowdown; 
high-speed growth is a thing of the past. Second, from 
an investment point of view, the challenge is in terms 
of awareness—the investment world now seems to 
believe that China is no longer as attractive an in-
vestment destination as it has been over the last 
decade.
As a China-focused buyout fund manager, Hony 
Capital believes that the key issue is to recognize that 
China’s new economic normal incorporates two un-
precedented changes. The first is the country’s shift 
from being a net importer of capital to a net exporter, 
and the second is its transformation from being “the 
world’s factory” to “the world’s marketplace” due to its 
consumption upgrade and the expansion of its mid-
dle-income class. Against the background of this new 
normal, the real Golden Age of investment in China has 
only just begun. Chinese companies and capital have 
investment opportunities that focus on innovation, 
quality, branding, capital and a combination of these 
factors are the only truly sustainable, viable opportuni-
ty which is acceptable and applicable both domestically 
and internationally. We now have an opportunity to de-
velop “the China advantage”, to take “the China path”, 
to tell “the China story”, and to promote outstanding 
Chinese companies to excel on the world stage, while 
also attracting a number of prominent multinational 
companies to provide better service to the Chinese 
market.
From Old Patterns to 
the New Normal: 
An Unusual Opportunity 
to Invest in China
By John Zhao
102 
  Apr. 2015
Investment 
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From “world’s factory” to “world’s market 
place”
Over the last three decades, China has benefited from 
high-speed economic growth brought about by globali-
zation. It has also made a tremendous contribution to 
the world economy, relying on its relatively low costs and 
abundant resources to attract international businesses 
looking to produce cheap but attractive goods, thus 
transforming itself into “the world’s factory”.
Today, China is already the world’s fastest growing, 
most attractive consumer market, and international 
businesses are increasingly focusing on China, not for 
its cheap labor, but because of its attractive market. 
But the speed of this shift has been so fast that over the 
next decade, the world as a whole – including China 
– will need breathing space in which to “catch up”. 
Previously, China had busied itself with the needs of 
European and US consumers. Today, however, the fo-
cus is shifting to servicing domestic consumers. Shop-
pers on Chinese streets want not only cheap and attrac-
tive goods, but also products that incorporate leading 
brands, technology and performance. For example, 
China is a major producer of mobile telephony, but 
imported Apple handsets remain firm favorites. China 
is also a major automobile manufacturing nation, but 
many of the vehicles on its roads are still imported. We 
believe that in the future, domestic products and servic-
es as well as customized services will become the norm, 
and it will be some time before every player comes to 
this same realization.
In fact, foreign companies offering leading brands, 
products, technologies and services have already 
spotted the enormous potential of this market. Fur-
thermore, this trend matches the new focus of Chinese 
economic growth.
This trend is confirmed by our own experience. 
In 2008, Hony helped Zoomlion, China’s leader in 
construction machinery, to acquire a pioneer in the 
construction machinery industry, the Italian company 
CIFA. By 2010, one of the companies in our portfolio, 
Biosensors, had become a world-renowned manu-
facturer of cardiac stents. By 2014, our investments 
included a Hollywood film and television production 
company, a Silicon Valley cloud computing business, 
and a famous British pizza chain. All of these were 
connected by a common investment theme: the “going 
out” of Chinese capital and their development of share-
holdings, leading to the introduction of high-quality 
foreign service and products. Chinese fund managers 
have enabled these foreign companies to become better 
Chinese companies.
Cross-border investment has always been a strategic 
focus for Hony. However, our definition of cross-border 
investment differs somewhat from that of our foreign 
counterparts. We seek out cross-border investment 
originating from China, and rely on our over 10 years 
experience of being a “China expert” to track the major 
John Zhao
CEO, Hony Capital
Apr. 2015 
  103 
WWW.BOAOREVIEW.COM
China’s economy is undergoing unprecedented changes–from 
being a net importer of capital to a net exporter, and from being 
“the world’s factory” to “the world’s marketplace”. Against 
the background of this new normal, the real Golden Age of 
investment in China has only just begun. Both “going out” and 
“attracting in” offer a historical opportunity to further integrate 
China into the global economy.
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