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Fosun's Foreign Overtures
Summary:Shanghai-based conglomerate Fosun Group is reaping the rewards of a carefully considered international strategy.

By Li Jing (李晶)
Business Review, page 41
Issue No. 550, Dec 29, 2011
Translated by Zhu Na
Original Article:

Shanghai-based conglomerate Fosun Group in September got regulatory approval to create an insurer in a joint venture with U.S. financial services company Prudential Financial Inc., and the Chinese firm has been reaping the rewards of a carefully developed international strategy.

Fosun now counts former U.S. Treasury Secretary John Snow as an advisor; it has established a joint private equity fund with industry giant Carlyle Group and is a direct shareholder of European tour operator Club Med.   

Chairman Guo Guangchang (郭广昌) last year arranged a dinner for the company’s international contacts at the Four Seasons in New York, where the 44-year-old changed out of his suit into a silk Tai Chi dress and gave a Kung Fu performance, as if to demonstrate how he plans to acquire foreign assets – with grace.

Fosun Group’s vice chairman Liang Xinjun (梁信军) received a breakfast invitation from Prudential Financial when he was doing a roadshow in US in 2009.

The U.S. company Vice President, Mark Grier, had a very clear purpose – a joint venture company operating on the Chinese market - however, when Liang heard this news, he pointed out that most of China’s life insurance companies were unprofitable and that most of the country’s joint-ventures also failed. Grier convinced him by describing Prudential’s experience targeting high-end professionals and providing group insurance, as well as his extensive research on the Chinese market.

Liang called Guo, who came to New York immediately and began a long negotiation process.

Wang says that Fosun begun its global investment strategy in 2010. The company now has an investment team in North America, which it plans to expand into Europe, Japan and Australia.

Fosun’s recruitment of Snow, who has played a key role in Fosun’s global investments, shows the importance of building contacts to support growth abroad.

It was through Snow that Fosun met the founder Carlyle and the Chief Executive of American International Group, Robert Benmosch.

“If it hadn’t been for Snow’s recommendation, Benmosche wouldn’t have listened to us carefully for an hour, he might even not have opened our email,” Liang said.

In fact, for Fosun, it has been a long battle to gain recognition in the international investment world. Before Fosun went public, Guo has hired experts to teach him how to understand the western way of thinking and their business culture. He has also use Chinese culture as a way of promoting his business.  

“We’re doing a Tai Chi show in New York this year, and shortly we are going to promote Tai Chi in Germany. We want Chinese culture to go aboard. We’re also opening some Tai Chi training schools globally and we’re sponsoring the exhibition of the Forbidden City’s collections in the Louvre museum,” said Wang, who has done Tai Chi private performances for his international business partners.  

Fosun’s only buys small stakes in foreign firms, and Liang says he hopes to overcome the mistrust of European and American companies towards Chinese investors.

Since buying its stake in Club Med, Fosun has helped the French firm build a holiday resort in northeast China, and both companies are in daily contact.

Fosun also bought 9.5 percent of Greek fashion retailer Folli Follie in the first half of 2011, but failed in a bid for Prada SpA’s shares.

“One of our most important standards for investing in overseas is that for every foreign company in which we invest we must see whether or not its growth in future is mainly from China,” Wang said, adding that Fosun only invests in such enterprises. Fosun’s global investment is also focused on consumer goods because of China’s own fast-expanding consumer demand.

In order to reduce risks, Fosun also starts off its investments on a small scale, with one source telling the EO that the company began with 37 million euro stake in Club Med, a sum that it could afford to lose. Its Folli Follie investment was for 100 million euros.

The process has taught Fosun how to cooperate with European professional investors and family shareholders.

The company has also been careful not to overpay and gave up a well-known luxury brand project in May. 

The translation of this story was edited by Will Bland.

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