Chinese FDI to Ireland up to €87m, bucking trend elsewhere

Chinese foreign direct investment (FDI) into the State rebounded last year, jumping 218 per cent to $100 million (€87.2 million), according to a study by international law firm Baker McKenzie.

The rise came even as overall investment by China into Europe and North America fell to a six-year low.

The increase in FDI from just €30 million in 2017 was largely due to the decision by Chinese biopharma company WuXi Biologics to invest €325 million in a manufacturing facility in Dundalk, Co Louth, in a move that will lead to 400 jobs being created over the next few years.

One of the other big transactions locally last year was the acquisition of Goodbody Stockbrokers by Chinese player Zhongze in July.

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Chinese FDI into the State experienced a record year in 2016, with investment totalling almost $3 billion, although this was largely a result of the HNA's Group acquisition of aircraft leasing company Avolon for $2.5 billion.

According to figures supplied by the Chinese embassy in Ireland, there are more than 20 companies from China in the State, employing about 2,000 people in total.

The latest figures show that completed Chinese FDI into Europe and North America fell sharply last year, dropping from $94 billion in 2016 and $111 billion a year later to just $30 billion in 2018.

Chinese FDI in Europe was down 70 per cent last year, slipping from $80 billion in 2017 to $22.5 billion last year. However, a significant chunk of the 2017 FDI was linked to the $43 billion acquisition of Syngenta by ChemChina. Stripping out this deal shows an underlying 40 per cent decline in Chinese investment in Europe last year.

A number of European countries, including France, Germany, Spain and Sweden saw a sharp jump in Chinese FDI last year, while the UK received more investment than any other country, at $4.94 billion, a 76 per cent fall on 2017.

The top sectors for investment were automotive, financial services and IT.

American slump

Chinese investment in North America was down 75 per cent last year to just $8 billion from $31 billion, having reached a peak $48 billion in 2016.

Investment in the US plunged 83 per cent to just $5 billion in 2018 on the back of an ever-worsening trade dispute and a related surge in regulatory interventions. In 2016 Chinese FDI to the US reached a peak $45.6 billion before falling to $29 billion a year later.

Canada in contrast, recorded a sharp uptick in Chinese investment with FDI rising 80 per cent from $1.5 billion in 2017 to $2.7 billion last year, mainly due to mining-related acquisitions.

The data shows Chinese companies also divested assets at an unprecedented pace in Europe and North America last year. Asset sales totalling $5 billion in Europe and $13 billion in North America took place in 2018 with a further $12 billion of assets up for sale this year.

According to Baker McKenzie, the forecast is for Chinese investment to be stronger in Europe this year, with more than $20 billion of pending transactions at the beginning of 2019. The pipeline in North America remains weak, however, with less than $5 billion of pending deals.

"In terms of the outlook there is still a healthy pipeline of M&As [mergers and acquisitions] in Europe, particularly in the mid-market space and a possible upside in North America if talks can move towards resolving trade conflict as well as concerns of the committee on foreign investment in the United States process ease," said Bee Chun Boo, M&A partner in Baker McKenzie's Beijing office.