Cofco And Its Acquisition Of Shares In Smithfield And Maverick

1569 words - 6 pages

China’s large population and untapped market potential has made it an ideal paradise for investors and multinational corporations to invest into by trying to break into the market in different ways, mostly through joint ventures or research and development centers. Now, China has become the largest foreign direct investor for the past ten years as encouraged by the Chinese government. China has expanded into other markets, most notably in Sudan in which China has built oil refineries while helping to indirectly start an economic boom in the politically unstable country for which China has been called out for. Nonetheless, China has allowed more of its domestic companies to acquire other companies. China’s state food and exports enterprise China National Cereals, Oils and Foodstuffs Corporation (COFCO), the largest grain, edible oil and food conglomerate, has recently bought 4.9% of the stakes in the American food corporation Smithfield Foods, Inc. in 2008 and more recently acquired Maverick Foods Co. Ltd, a joint venture between the American Smithfield Foods, Inc. and the Belgian Artel Group. Stemming from its own economic growth and trajectory as well as from the changing international economic climate, COFCO’s buying of stakes in Smithfield and acquiring Smithfield’s joint venture Maverick Foods shows China’s rising status as a growing economic power with its own capital and resources.

China’s acquisition of a significant foods company and its joint venture with the Artal Group starts back to the beginnings of the global economic crisis and the worldwide food shortage. As European and American assets decreased significantly, the Chinese renminbi has been greatly appreciated against the American dollar. Throughout its economic growth in the 1980s and 1990s, the Chinese government has gradually privatized several of its state-owned enterprises to utilize its foreign capital to take advantage of international natural resources and commodities abroad in order for China to be competitive and to become a major competitor, trying to shed its reputation as a producer of cheap goods, which is shown through its investment in information technology and other valued assets in the hopes of creating its own intellectual property and branding itself in the international market as a viable economic powerhouse and competitor.

Chinese private businesses have looked to other parts of the world ambitiously, especially with the United States’ businesses for where much domestic controversy has been made with the vast number of Chinese products have flooded the American market. Nonetheless, Chinese companies have been interested in American businesses by recent developments in buying of shares and acquisitions of companies. Out of the choices of foreign direct investment, Chinese private enterprises have embarked on acquisition since it would be easier to meet branding reputation and would make the transition of company policies and management less...

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