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Buffett Has no New Investment Plan in China,Says There's no Competitive Advantage

05-06 13:58 Caijing
The Buffet-backed BYD in March reported a drop of over 94% in net profit for the year 2012 largely due to weakening demands in the world’s second largest economy amid a downturn.

Warren Buffett, the Berkshire Hathaway CEO, said he has no new plans to invest in China, as the Oracle of Omaha remained conservative about competitive edges of the world’s second largest economy, following disappointing performance of his once favored investment in Chinese auto-maker BYD. 

There’s no competitive advantage in China, said the billionaire in taking up a question from a shareholder from Shanghai as the annual meeting of Berkshire Shareholders was drawing to a close in Omaha on May 4th. 

The pessimistic remarks about China came as a strong contrast with five years ago when he invested in a new plant of Iscar Metalworking Companies (IMC) in Dalian, a coastal city in northeast China, saying China has huge growth potential.  

Buffett purchased 1.3% stake in PetroChina, China’s largest oil and gas producer, with $488million between 2002 and 2003 before selling all the shares in November, 2011, which gained the investor as much as $4billion.

Berkshire Hathaway bought 225million shares of BYD, a Chinese auto and battery maker, or just under 10% of the company’s stock at 8 HKD a share before it soared to over 80HKD in 2010.

The company, however, had seen slumping businesses since then with its shares dropping as much as over 80% to 12.44HKD in October, 2011.

The Buffett-backed BYD in March reported a drop of over 94% in net profit for the year 2012 largely due to weakening demands in the world’s second largest economy amid a downturn.

Buffett said he would prefer Chinese companies that export quality goods, especially consumer goods at last year's annual shareholder’s meeting for Berkshire Hathaway.

Berkshire vice chairman Charlie Munger said China has a huge auto market which is BYD’s main focus, and the number of cars he expected BYD to sell in the U.S. would be very small.

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