A commentary by Bloomberg’s Pesek says “A unique feature of China’s economic model is a greater emphasis on acquiring overseas brands than creating indigenous names.”  Reading from this sentance alone, it seems just a statement.  Putting the sentense in the context, it seems this statement has some negative implications.  I just have some different opinions.

First, there is nothing wrong with this approach.  Companies can develop their own brands or acquire existing brands.  It all depends on which alternative is cheaper.  Developing new brands may be time-consuming.  For cash abundant companies, acquiring an existing brand often make more sense than developing it internally.  Isn’t this a lot of acquisitions about?

It is true Chinese companies are increasingly expanding overseas.  But that is natural, given the Chinese economy has only become noticeable in the last a few years to the outside world, and China did not have any truly international presents before.  With China’s rapid economic growth, and with Chinese Yuan’s increasing appreciation, there is a natural tendency for Chinese companies to go abroad.  Do not forget, this kind of expansion is supported by the free market based international trade theory, and acquisition is a mutually beneficial business activity.

Second, it is an exaggeration to say China only emphasizes on acquiring overseas brands.  Maybe the attempt to acquire international brands like Rio Tinto and Unocal attracted a lot of media attention, but there are many quite international expansions by other Chinese companies.  Just last week, China Construction Bank, the world’s second largest bank by market value, set up its first ever overseas branches both in London and in New York.  None of them is through acquisition.

Third, in each of China’s long term development plan, the Chinese government emphasizes the importance of creating indigenous brand names.  Just check this one as an example.  It is a common sense that you can never have cutting edge technologies just by purchasing from others.  Chinese government certainly knows that.