The grass is always greener on the other side in China: foreign companies want to tap the country's 1.3 billion consumers while some Chinese firms are desperate to escape the cut-throat competition at home.

Foreign executives attending Reuters China Century Summit said they are investing for the future in China, though with an increased focus on the bottom line.

Many Chinese companies, by contrast, are frustrated with intensifying competition and razor-thin margins at home and eager to make forays into overseas markets.

Chinese companies want to broaden their footprint and foreign companies want to tap into the high-growth emerging markets, said Vincent Chan, head of China equities at Credit Suisse. It makes sense for both sides.

Foreign firms, which poured $60 billion into the country last year, are lured by China's break-neck growth that promises returns higher than most other places.

If you see a $100 bill, a $500 bill, and a $1,000 bill on the ground, which one are you going to pick up first? asked Frank C.T. Lin, chief financial officer of Tingyi (Cayman Islands) Holding Corp. , a Taiwanese food and beverage company dubbed as China's instant noodle king.

Of course the $1,000 bill, and that stands for China.

Foreign banks are licking their lips at the $2 trillion in savings tucked away in Chinese banks. They are also vying to get a slice of China's bourgeoning credit card, mortgage and wealth management business, as China is slated to allow them to provide local currency business to its citizens in December

Whenever it is possible, we would like to get into the renminbi business, said Qiu Zhi Zhong, ABN AMRO's China chief.


Chinese companies are eager to go West as they start to hit market share ceilings in their home market. Fierce competition also forces them to broaden their sales base abroad.

But so far, there are few success stories.

For example, the $1.25 billion acquisition of IBM's computer business pushed China's Lenovo deep into red. TCL Multimedia and TCL Communication have also suffered skyrocketing costs from the TV and phone businesses they acquired in Europe.

Undeterred by the setback, Lenovo's Chairman Yang Yuanqing told Reuters that he would not rule out another acquisition even though it is still struggling to digest the IBM deal.

Without scale, manufacturing companies have no way to compete, Yang said.

E-commerce company Alibaba also said the successful integration of Yahoo's China business gave him the confidence to do overseas deals.


There are exceptions.

Bank of China, China's most international bank with 600 overseas branches, has turned its attention to the domestic market.

Heeding advice from Boston Consulting three years ago, it has reduced the share of overseas assets to 25 percent of the total, from 36 percent. Profit contribution from its domestic business tripled to 75 percent from 25 percent during the period.

This is a wonderful market. Why should we go abroad? Executive Assistant President Zhu Min asked.

Tsingtao Brewery Executive President Liu Ying Di is another stay-at-home executive. China's largest beer maker would not rush abroad, he said, even though its exports are more than four times as profitable as its domestic business. Tsingtao would only set up foreign factories when its exports to that area reach a certain level.

Chinese companies should be prudent when venturing abroad and start small, analysts said.

I don't like companies that do mega-deals in their first attempt, Credit Suisse's Chan said. The chance for the first acquisition to fail is pretty big.