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04/12/2016

Chinese investments soar in crisis-hit Europe

Euro & Finance

Chinese investments soar in crisis-hit Europe

China is investing heavily in the European countries worst hit by the economic crisis. [ThomasPieterse/Flickr]

Since 2010, China has steadily increased its investments in Europe, particularly in the countries worst affected by the crisis. In return, investors can benefit from attractive residency policies. EurActiv France reports

China’s foreign investment model has evolved in recent years, using the financial crisis as a springboard for European investment, according to the Financial Times. The total value of Chinese investments in the European Union was around 6.1 billion euros in 2010, but had quadrupled to €27 billion by 2012.

Chinese investment strategy varies from country to country, but the main sectors attracting investment are industry, consumer products, energy and raw materials, according to a study by Silvia Merler of the think tank Bruegel,

The largest benefactors of investment are Germany, the United Kingdom and the Netherlands. Chinese investment in Germany is concentrated on machinery, alternative energy sources, car parts and equipment. In France, the focus is on consumer industries, and in the UK, it covers a broad spectrum of industries.

China riding the crisis

Since 2012, China appears to have changed course, investing heavily in the countries most affected by the crisis, like Italy, Greece, Portugal and Spain. The Financial Times says that China has been moving its African, Asian and Latin American investments in natural resources to Europe, where many national companies were sold off quickly and cheaply at the height of the crisis.

In Italy, investors from China and Hong Kong have supported around 195 SMEs, and reinforced larger companies with extensive share acquisitions. Chinese company State Grid has invested heavily in the Italian electrical network, purchasing 35% of the shares in the state owned energy company CDP, Silvia Merler explained.

>> Read: Commission says EU-China energy efficiency links are ‘deepening’

In Greece, an increasingly popular destination for Chinese tourists, investors are concentrating on shipping and tourism. In June, Greece and China signed a ship-building deal worth 2.3 billion dollars, financed by the China Development Bank.

In Portugal, Chinese investors swept up 45% of the total assets put up for privatisation under the Economic Adjustment Programme driven by the EU and the International Monetary Fund. These investments were initially concentrated on electrical infrastructure, but recently the focus has shifted to the financial services, with the Chinese conglomerate Fosun acquiring 80% of the Portuguese insurer Caixa Seguros in 2014.

>> Read: ECB’s Draghi presents eurozone rescue plan

A reciprocal arrangement

European countries have seen this influx of investment from the Far East as the catalyst needed to relaunch the property sector. The Financial Times reports that countries like Lithuania, Portugal, Spain, Greece, Cyprus and Hungary have seduced buyers by offering residence permits to non-Europeans who spend a certain amount on property.

This “golden visa” is available for 500,000 euro is Spain and Portugal, and 250,000 in Greece and Hungary. Under this scheme, the Portuguese property market has grown by 900 million euro.

Silvia Merler believes that the economic crisis opened doors to Chinese investment that would otherwise have remained closed, and that it can expect a long and profitable future.

Background

Economic relations between the EU and China have been growing progressively stronger since 1975.

China is the world's third largest economy after the United States and the EU, and the biggest commercial power. The EU is China's biggest commercial partner, while China is the EU's main source of imports and its second most important commercial partner.

Europe is also one of the top five investors in China (17.8 billion euro in 2011).Chinese investments in Europe have grown rapidly since the 2008 crisis, and reached 3.1 billion euro in 2011.

Further Reading