CHINA’S INVESTMENT in Europe tripled last year to €7.4 billion, while the number of deals with a value of more than €800,000 doubled from less than 50 to almost 100 in 2010 and 2011, a report last week has shown.
Chinese firms are kicking off a wave of outbound global investment that could total €1.6 trillion by 2020, said the report by Rhodium Group, a New York City-based research firm.
Total Chinese investment in Europe, both acquiring established businesses and setting up greenfield operations, could rise as high as €400 billion by 2020, the report said.
“Europe is experiencing the start of a structural surge in outbound direct investment in advanced economies by Chinese firms,” said the report, which was written by Thilo Hanemann and Daniel Rosen, and prepared in partnership with China International Capital Corp, a state-owned investment bank, and PR firm Brunswick Group.
“Our detailed data support the view that Chinese direct investment in Europe is driven overwhelmingly by commercial motives,” it said. “Direct political guidance has played a very minor role in Chinese investment in Europe thus far.”
The report shows Ireland punching below its weight when it comes to investment from China, especially given the country’s success generally on winning FDI. The same was true of Spain, Luxembourg and Denmark.
While Ireland, along with Luxembourg and Spain, has received a lot of FDI in the past 10 years, the beginning of our economic woes coincided with the boom in Chinese investment. Other smaller European countries with major fiscal and structural problems have also not gotten much attention from Chinese investors thus far, with the exception of Greece, the report said.
But the Chinese will be looking for bargains soon, the authors say. “Looking forward, the privatisation of state assets in fiscally troubled countries provides an attractive opportunity for Chinese buyers. Assets with a long-term stable return on investment such as infrastructure are the focus of Chinese long-term investors, as the sale of two billion-dollar stakes in Portuguese utilities firms to Chinese companies in early 2012 shows,” they write.
The report also points out how Chinese firms are investing in Europe not out of charity, but to defend market share, acquire technologies and fight competition at home, although there could be some issues for policymakers.
“There is ample reason to anticipate attempts by Beijing to mix money with politics – they already have with Japan over rare earths, and Europe over support for crisis stabilisation funds,” it said.
