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As the confidence and capital become stronger and stronger, the state lifted the restrictions on foreign investment in the manufacturing industry last year.
To a certain extent, this shows that we are opening our doors to foreign investment in our own manufacturing sector.
For this reason, some people began to worry about "over-opening", after all, there were lessons from the past!
After the reform and opening up, a large amount of foreign capital poured in, and the national industry got the opportunity to develop, but at the same time, it was also seriously threatened.
Among them, the most typical case is the merger and acquisition of Carlyle and XCMG in the United States in 2006.
At the time, Carlyle wanted to acquire an 85 percent stake in XCMG for just $375 million.
The agreement was signed, but the CEO of Sany Heavy Industry stood up and denounced the "cheap sale of state-owned assets".
So did the deal work out in the end?
Foreign mergers and acquisitions of key state-owned enterprises
After the collapse of the Soviet Union in 1991, the United States' strategic center of gravity shifted eastward, and for a long time, China endured humiliation and carried the burden forward.
From time to time, the United States and the West have provoked mainland sovereignty, such as the Taiwan Strait crisis, the bombing of the embassy of the Federal Republic of Yugoslavia, and the plane collision incident in the South China Sea.
In order to develop its economy, China must not undermine Sino-US relations, but can only turn big things into small things, and at the same time, it has to open its doors to the wanton infiltration of cultural trends in the United States and the West.
What's even more terrifying is the entry of foreign capital, which poses a serious threat to core national enterprises.
Take the current Huawei as an example.
It not only pays tens of billions of taxes for the country, but also absorbs millions of laborers, drives the development of upstream and downstream enterprises, and breaks the high-tech monopoly of Europe and the United States.
Our military industry, under the blockade of the West, has relied entirely on its own independent research and development, and firmly grasped the core technology in its own hands, so that it is invincible today.
If these industries involve foreign assets, the consequences are unimaginable.
The most striking example of the opposite is India.
Although they have powerful national industries, such as biopharmaceuticals, software outsourcing, etc., they do not have strong national industries.
Therefore, "Made in China" is popular in the Indian market, and various countries are arming the Indian army with weapons, and India can only spend money to solve the demand.
However, if a large country does not have a strong national industry, it will eventually suffer.
Ironically, India is very "diligent" in protecting national industries, trying every means to suppress foreign companies, and has become a veritable "crematorium for foreign companies".
Xiaomi, OPPO, Amazon, Coca-Cola, Vodafone, etc., major companies in various countries have not been spared.
In this way, China seems to have turned against India, and has even implemented a strategy of "over-opening" to foreign investment.
The entry of foreign capital into China is like a hungry wolf seeing a lamb, especially after China's accession to the WTO, when the economy is developing rapidly and economic supervision is not perfect.
In 2006, foreign giants bought shares in Chinese banks at low prices, grabbing more than 600 billion yuan, and we lost hundreds of billions of yuan.
Who remembers the U.S. soybean manufacturing scare in China, controlling nearly two-thirds of the oil manufacturing companies and arbitrarily setting prices?
However, compared with the manipulated daily necessities and food, what is more terrifying is that a large number of large state-owned backbone enterprises have been merged.
Such as Northwest Bearing, Hangzhou Gears, Wuhan Machine Tool Factory, Wuhan Boiler Factory, Jinxi Chemical Machinery, Jixi Coal Mining Machinery, Shenyang Rock Drilling Factory, SEM Machinery, Dalian Motor, etc.
These are all established enterprises, and many of them have also undertaken military tasks.
This means that the core technical capabilities and R&D institutions they possess are all in the pockets of foreign capital.
How scary!
However, at that time, the Chinese people were still unaware of this, and even felt that these were new benchmarks for reform.
It was not until the acquisition of XCMG by the Carlyle Group in 2006 that the Chinese realized the seriousness of the problem.
Carlyle acquires XCMG
XCMG was established on the eve of liberation, its predecessor was the Eighth Arsenal of Lunan of the Eighth Route Army, and a series of construction machinery products accounted for a very considerable share in the market.
In 1996, XCMG was listed on the Shenzhen Stock Exchange and achieved a profit of 100 million yuan that year.
It can be said that XCMG is not only the leading enterprise of heavy industry in mainland China, but also the pride of China's manufacturing industry.
However, in the context of economic globalization, successful people such as XCMG will also face the dilemma of reform.
Since 2002, XCMG's asset income has been declining, falling to 5% in 2005, and the group's debt burden has become increasingly heavy.
The leadership had to seek external investment and use the capital, resources and experience of the capital giants to transform XCMG machinery and achieve internationalization.
At this time, the Carlyle Group of the United States took the initiative to stand up.
The Carlyle Group has been one of the world's largest private equity investment funds for more than 100 years, starting with leveraged buyouts.
In a classic case, in 2005, Carlyle and Merrill Lynch teamed up to buy Ford's dismal Hertz rental car company.
Then, in less than a year, the Hertz Company was put public, and Carlyle slowly sold her shares, earning $1 billion in dividends in the first year until she exited completely.
In 2000, Carlyle set up an office in Beijing to set up an office in China.
Five years later, Carlyle acquired an 85 percent stake in XCMG Machinery, a subsidiary of XCMG, for $375 million in cash, with the right to repurchase some of its shares over the next five years.
In fact, the signing process was not smooth.
Carlyle met a formidable competitor – Caterpillar, a giant in the machinery industry.
The main reason why XCMG chose the former from the financial and machinery companies is that Carlyle promised that it will continue to maintain the XCMG brand after the merger and acquisition, and will not sell XCMG machinery to industry competitors when it exits in the future.
And the Xu trade union cares about "losing the brand and abandoning the factory", which is also a lesson from the past.
Nanfu, the mainland's former No. 1 battery manufacturer, was resold to Gillette in the United States in 2003 after being controlled by an international fund led by Morgan Stanley.
Since then, Nanfu's prestige in the market has gradually faded.
However, after listening to Carlyle's promise, the Municipal Economic and Trade Commission still said with satisfaction: "The cooperation with industrial capital like Caterpillar will repeat the mistakes of the automobile industry, and the hope of maintaining the national brand will be disappointed." ”
They didn't expect that XCMG was acquired to be a degenerate national brand!
The Xuzhou municipal government readily approved the deal between Carlyle and XCMG, and only needs the approval of the Jiangsu provincial government before it can be submitted to the relevant national authorities for approval.
At this time, the CEO of Sany Heavy Industry made a decisive move to Wenbo and denounced this as a "cheap sale of state-owned assets".
Launched a blog war against Wenbo
Sany Heavy Industry Group, which is also a large construction machinery manufacturer in mainland China, can be regarded as a competitor of XCMG Machinery.
In 2006, CEO Xiang Wenbo published a blog post "On Carlyle's Acquisition of 85% of XCMG's Shares", which caused a fierce response.
He strongly criticized the deal between Carlyle and XCMG, and pointed out that it was a cheap sale of state-owned assets and harmed national interests.
According to the valuation of XCMG market, there are at least tens of billions of yuan, and Carlyle bought 85% of the shares for $375 million, isn't it a cheap sale?
As the leader of China's machinery industry, XCMG's value lies not only in technology, brand and market.
If a foreign capital that only pursues interests merges and acquisitions of XCMG, it is not only not conducive to the development of China's construction machinery industry, but also damages and threatens the country's economic security.
If all the advantageous industries are sold, how can China develop advanced technology and manufacture modern equipment and advanced weapons in the end?
How can we be invincible in global competition? Do you want to ask foreigners?
Xiang Wenbo also proposed a solution, that is, Sany Heavy Industry to acquire the entire equity of XCMG Machinery for 400 million US dollars.
At the same time, he launched an online signature campaign, calling on netizens to demand that the government stop Carlyle's acquisition of XCMG.
One stone stirred up a thousand waves, and the sound of response gradually rose.
In fact, Xiang Wenbo also had many people who opposed the merger and acquisition before.
You know, this deal was the largest transfer of state-owned equity from China to foreign capital at that time.
Many people have questioned that "excessive mergers and acquisitions by foreign capital threaten national economic security".
The senior management of the China Machinery Industry Federation has also bitterly stated that a large number of equipment manufacturing industries have been acquired by foreign holdings, and now the fruits are only very dangerous.
At a time when reflection was generated in China, Xiang Wenbo's deafening article woke up the Chinese like a slap in the face.
Carlyle's acquisition of XCMG was put on hold, as were several mergers and acquisitions that were underway at the time.
Including Caterpillar Holding Xiamen Construction Machinery of the United States, ZF Holding Hangzhou Forward Gearbox of Germany, and GE Holding Shenyang Blower of the United States.
What is the attitude of the party that has attracted the most attention?
The Carlyle Group assures that the acquisition of XCMG will not bring about a "monopoly" in the market.
Surprisingly, XCMG continued to support the Carlyle Group's acquisition plan, and even urged the National Development and Reform Commission and the Ministry of Commerce to speed up the approval process.
It's also very helpless to say, if it weren't for the fact that there was no recruitment, who would be willing to let foreign capital hold.
Wang Min, chairman of XCMG, said: If you don't cooperate with Carlyle, what will happen to the company's debts, and how will more than 20,000 employees be settled?
Some people say that XCMG can ask the state for help, but the state does not have a specific way to support such enterprises.
If it can be solved, it will not allow a large number of core enterprises to embark on the road of mergers and acquisitions.
Eventually, under the pressure of public opinion, the Ministry of Commerce declared the merger agreement between Carlyle and XCMG null and void.
The National Development and Reform Commission began to formulate measures to maintain economic security and industrial security in the restructuring of the equipment manufacturing industry.
In the future, the state will no longer allow foreign investors to control a number of industries and enterprises that are subject to key protection, and joint ventures and mergers and acquisitions in related fields will also be subject to key scrutiny.
Today, XCMG and Sany have become one of the top 10 machinery manufacturers in the world and have become influential international enterprises.
Xiang Wenbo's original prevention saved not only XCMG Machinery, but also the independence and prosperity of China's manufacturing industry.
Resources
China News Network, "The Battle of the Carlyle Group of International Investment Fund: A M&A Triggers Reflection"