Finding Potential in China's Evolving Economy
Chicago – Reflecting on more than a decade of investing in China, Baird Capital views today's China as a combination of two very different economies. "New" China, comprised of consumer products and services, healthcare, technology/internet and modern services sectors, is growing at strong rates with significant upside as China shifts from an investment-led to a consumption-led economy. This is a sharp contrast to "Old" China, which is comprised of more traditional sectors such as commodities, products linked to real estate and infrastructure building, export manufacturing and old line industrial products. The industries of Old China have been challenged as the country's economy shifts toward consumers, and successfully cultivating investments in these older sectors has required deep hands-on expertise, particularly in the midst of recent market volatility.
In this context, Baird Capital's recent sale of two manufacturing companies from its China growth equity portfolio is particularly noteworthy. Boston Plastics (Shanghai) Pte. Ltd. ("Boston Plastics"), a high precision plastics injection molding and sub-assemblies company, was sold to US Farathane Corporation in January. Xinghe Valve Co. ("Xinghe"), an instrumentation valves and fittings company, was sold to Israeli-based valve and fittings company Ham-Let (Israel-Canada) Ltd, in a deal that just received regulatory approval. The terms of the deals were not disclosed. Baird Capital initially invested in Boston Plastic in 2012 and Xinghe in 2011.
"We built a strong partnership with these companies and are very pleased that despite the challenging industrial markets we were able to leverage our global network to achieve these outcomes," said Huaming Gu, Partner, Baird Capital. "Our geographic reach and deep sector expertise allows us to identify opportunities that benefit from our operational expertise as well as underscore our belief that with the right resources you can build leading companies in China."
"We are thrilled with the exit of Boston Plastics and Xinghe," added Gordon Pan, President of Baird Capital. "These investments in China leveraged knowledge we gained over the last 25 years in the U.S. and Europe, and we are grateful to the management teams of both companies for being open to our international resources and relationships."
"Volatility is the nature of the beast in emerging economies, so it is very difficult to play a country like China quarter to quarter," said Brett Tucker, Partner, Baird Capital. "As long term investors in China, we're focused on company fundamentals rather than GDP growth rates. There is no doubt that China's economy today is much more complex, sophisticated and difficult to manage than it was a decade ago, and certainly recent policy missteps have shaken confidence. However, in terms of China's overall ability to manage its economy, we believe the country's multi-decade record speaks for itself and its capabilities."
About Baird Capital
Baird Capital makes venture capital, growth equity and private equity investments in strategically targeted sectors around the world. Having invested in more than 290 companies over its history, Baird Capital partners with entrepreneurs and, leveraging its executive networks, strives to build exceptional companies. Baird Capital provides operational support to its portfolio companies through teams on the ground in Asia, a proactive portfolio operations team and a deep network of relationships which together strive to deliver enhanced shareholder value. Baird Capital is the direct private investment arm of Robert W. Baird & Co. For more information, please visit BairdCapital.com.
For additional information, contact:
Angela Pittman Taylor
Baird Public Relations