Deutsche Bank figures on Chinese investments in Europe shows that annual Chinese investment has risen by more than four times in the two-year period from 2010 to 2012. Investments into Europe from China, which rose from €6.1bn in 2010 to almost €27bn in 2012, are expected to rise further in the coming decade.
While the debt crisis in Europe saw a dip in investments from China, the shift from African, Asian, and Latin-American countries to developed European countries saw the UK becoming the most preferred investment destination for Chinese funds in 2012.
Chinese firms have bought stakes in companies running Heathrow and Manchester airports along with North Sea Oil and Thames Water. Chinese funds are expected to fund the Hinkley Point C nuclear power plant as well.
Portugal, according to Deutsche Bank, has witnessed significant FDI inflows from China in 2011 and 2014. Chinese firms now own significant minor stakes in utilities and infrastructure companies in Portugal. In the past three years, Portugal has raised €9.2bn from sale of the State’s stake in companies and around 45% of the sale proceeds have come from China. This makes China the most important source of FDI for Portugal.
Portugal’s Immigrant Investor program that offers residency permits to Chinese investors against purchase of property in Portugal is an added attraction for wealthy Chinese immigrants. Along with Spain, Cyprus, Greece, and Hungary, Portugal has attracted a lot of investment through the golden visa route.
Italy is another European country that has seen significant increase in investments from China. Chinese firms have invested around $7 billion in Italy with around $3.5 billion investments being made in the first half of 2014 itself. State-owned Chinese firms seeking a safe investment offering steady and predictable long-term returns are investing in utility companies in Europe.
Concerns have been raised by politicians about the consequences of allowing Chinese investments in strategic sectors like energy and telecom infrastructure. Market strategists from different investment banks opine that the encouragement from Chinese authorities may involve the desires to buttress access to essential infrastructure and raw materials with diversification of investment portfolios being an additional advantage.
Other experts emphasize that Chinese investments contribute just 0.7% of the total FDI inflows into the European Union with neighboring countries like Switzerland pumping in significantly higher amount of funds. The Eurozone crisis that led to fall in asset prices and disruption of local sources of credit may have made Europe an attractive destination for Chinese FDI>
The 2010-2012 surge may have come to an end with 2013 data indicating a slowdown in inflow of funds due to the weakening of the Chinese economy.
Nations like Portugal and the UK are unlikely to experience sudden change in investor appetite or significant reversal of capital inflow because Chinese FDI, apart from being modest, has been made for long-term gains as opposed to short-term benefits.
Even as they dismiss the threat of the EU becoming dependent on Chinese investments, market experts point out that Chinese investments have simply not been large enough to contribute to the economy of European countries in a significant manner. However, south European countries that have been hit hard by the global crisis may benefit from FDI from China if the same is used for building new infrastructure and similar projects.
Source: www.ftadviser.com