3i Group Plc, Europe's biggest publicly traded private equity firm, said the pace of its investments in China may increase in the first half after it profited from selling a stake in a Chinese luxury-brands store.
3i is "cautiously optimistic about 2010" and may have "a few deals to announce" by the middle of next year, Anna Cheung, co-head of China operations, said in a telephone interview today.
The private-equity firm sold its stake in PCD Stores (Group) Ltd. for $65 million in the luxury department store operator's HK$2.93 billion ($377 million) initial public offering. The London-based firm invested $31 million in PCD in October 2005.
3i is focusing on taking minority stakes in Chinese consumer and retail companies and those involved in alternative energy, industrial and business services, she said.
"In the first half of 2009, even if you wanted to buy, there was nothing to buy and that's a pretty consistent message for China," Cheung, a partner at London-based 3i, said. "Now, valuation has normalized quite a bit. You can find people that can agree on a price, and both sides see a win-win."
Chinese luxury-goods sales may rise 12 percent this year, according to a study by Bain & Co., with global sales totaling 153 billion euros ($224 billion). Fifteen percent of the 300 directly operated stores that Bain estimates will be opened this year will be in mainland China.
Ostentatious"China is about ostentatious consumption," Alfred Chan, chairman of PCD Stores, said in an interview in Hong Kong today. "The Chinese want to get rich, and it's normal to reward themselves for their success, to get a good quality of life. They will spend on luxury products."
China is spending 4 trillion yuan ($586 billion) to boost its economy, focusing on increasing local consumption after trade slumped and manufacturing output slowed. Chinese retail sales rose 15.8 percent in November from a year ago.
"China's growth is unstoppable and their ability to spend will continue to grow," Cheung said. "Some of these consumers, don't know the brands yet. They're like babies. You have to teach them and they have to learn, so there's a lot more room to grow."
3i fell 0.4 percent to 277.1 pence at 10:36 a.m. in London today. The stock has risen 63 percent this year.