Left to right: John Ray, chairman, Georgia China Alliance; Dafei Chen, partner, Han Kun Law Offices and Don Johnson, director, Dean Rusk Center at the University of Georgia School of Law. Photo by Trevor Williams

Over the next decade Chinese companies will increasingly need to consolidate to compete with larger foreign enterprises, and companies there will be looking outward for investment opportunities, a Chinese attorney predicted in Atlanta.

Dafei Chen, a partner at Han Kun Law Offices in Beijing, said mergers and acquisitions are still somewhat of a rarity in China, but that could change as more Chinese companies look to enter global markets.

In the U.S., merger activity is commonplace, “but in China they’re still getting used to it, especially in manufacturing. Very small companies are surviving but not knowing how to get to the next step,” Mr. Chen told members of the Georgia China Alliance during a presentation at the Metro Atlanta Chamber of Commerce July 1.

The increased consolidation will occur at the same time that China looks to gradually change the perception that it’s just a low-cost manufacturing and export center, Mr. Chen said. 

Chinese universities are graduating thousands of engineers every year, and the national corporate tax rate for high-tech companies is 10 percent less than in other sectors, he added.

China’s 2007 “Foreign Investment Catalogue,” which groups industry sectors into four categories gauging their relevance to the government economic agenda, gives “encouraged” status to renewable energy, high-tech and environmental companies, among others.

“China does not like to be called the world’s factory.  They want to upgrade their industries.  They don’t want to be known as a country of cheap labor,” said Mr. Chen, whose firm specializes in cross-border transactions and features many U.S.-trained attorneys.

Although Mr. Chen’s presentation focused on strategies and legal issues facing foreign companies investing or acquiring companies in China, he also outlined some of the difficulties Chinese companies face as they seek to put their capital to work in new global markets.

The chamber served as a fitting venue to broach that subject.  In March, it conducted an eight-city trade mission in China that complemented the launch of Delta Air Lines Inc.’s inaugural nonstop flight from Atlanta to Shanghai. 

Jorge Fernandez, the chamber’s vice president for global commerce, has traveled to China six times and led parts of that trade mission.

During remarks preceding Mr. Chen's presentation, Mr. Fernandez said that China is a main strategic market for his division, both for inbound and outbound investment.  

The state of Georgia has also openly courted investment from the fast-growing Asian economy.  Three Chinese manufacturers have pledged to build factories here, and Gov. Sonny Perdue led a business mission to Beijing in April to encourage more investment and to open a Georgia trade and tourism office.

Donald Johnson, a former congressman, ambassador in the Office of the U.S. Trade Representative and board member of the Georgia China Alliance helped facilitate Mr. Chen's visit to Atlanta.

Mr. Johnson, director of the Dean Rusk Center at the University of Georgia School of Law, has worked with Mr. Chen to facilitate study abroad programs and internships for law students in China.

Four UGA students are currently participating in the Georgia Law Summer Program in China.  The four-week internship introduces students to China’s commercial law and business landscape through partnerships with Tsinghua University in Beijing and Fudan University in Shanghai.

Two of the students are working with Han Kun Law Offices, Mr. Chen’s firm.

His first trip to Atlanta was part of a 12-day, seven-city U.S. tour.