RisingShiningSuperpower
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India must also be more active in this area. India should invest more in Europe. India must invest more than China to gain influence. The 21st Century will be defined by competition between India and China. Modi-ji will give India a head start.
Chinese investors surged into EU at height of debt crisis - FT.com
Chinese investors surged into EU at height of debt crisis
©AP
As investors fled Europe in the worst days of its sovereign debt crisis, China-based companies moved in the other direction and surged in, with cash flowing from China into some of the hardest-hit countries of the eurozone periphery.
In 2010, the total stock of Chinese direct investment in the EU was just over €6.1bn – less than what was held by India, Iceland or Nigeria. By the end of 2012, Chinese investment stock had quadrupled, to nearly €27bn, according to figures compiled by Deutsche Bank.
The buying spree, analysts say, was nothing short of a transformation of the model of Chinese outbound investment. It is expected to increase steadily over the next decade.
“We saw a massive spike in Chinese investment in Europe, particularly [mergers and acquisitions] during the height of the debt crisis,” says Thilo Hanemann, an expert in Chinese outbound investment and research director at Rhodium Group, a research consultancy.
“This was partly opportunistic buying because assets were cheap and partly it was a structural secular shift in Chinese outbound investment, from securing natural resources in developing countries to acquiring brands and technology in developed countries.”
The Financial Times this week investigates the modern trail of Chinese investment, migration and ambition in Europe. A seriesof reports from Beijing to Milan to Madrid to Lisbon to Athens reveal the scale of China’s expansion in Europe, the flow of investment and the strategies of Chinese investors and migrants caught up in a national effort – a “going out” policy in place since 1999 – to find new markets and enhance China’s economic strength.
The incursion has not been all plain sailing. When a Chinese state-owned consortium won the bid to build a road from Warsaw to the German border, the government in Beijing presented the deal as a model for Chinese contractors in Europe.
But after cost over-runs and repeated breaches of local labour law, the Polish government cancelled the contract with Covec, the Chinese consortium, in 2011 – less than two years into the project.
What befuddled the Chinese company most were Polish environmental laws requiring tunnels for wildlife to be built beneath the road and a two-week work stoppage while seven rare species of frogs, toads and newts were moved out of the way.
The disaster has become business folklore in Beijing – a parable of the legal and cultural issues Chinese investors face when trying to do business or buy companies in Europe. Still, the obstacles faced by Covec, as well as other pioneering companies, have not dented China’s confidence in European ventures even in times of turmoil.
Total annual Chinese investment in Europe has dropped somewhat from the peak years of 2011 and 2012, but analysts across the continent see robust deals in the making and signs that investment will increase significantly this decade.
Official data on Chinese outbound – and inbound – investment are notoriously unreliable because the government does not measure most activity by Chinese companies’ offshore subsidiaries and does not attempt to work out where investment ends up.
Independent entities such as Rhodium Group and the Heritage Foundation, a conservative US-based think-tank, have chronicled a recent shift in Chinese money from resource-rich developing countries in Africa to partnerships in developed countries, including Europe.
Private Chinese enterprises are playing an important role in the transition. State-owned Chinese companies were the vanguard for China’s outward investment, with state-owned businesses accounting for 78 per cent of investment in Europe between 2008 and 2013, according to Deutsche Bank. At home, state behemoths dominate industries such as telecoms, transport, energy and finance.
But between 2011 and 2013, private companies’ share in Chinese M&A activity in the continent rose to over 30 per cent – compared to 4 per cent in the previous three years, Deutsche Bank research shows.
Investment tends to cluster in individual countries in any given year, according to data compiled by the Heritage Foundation. So far in 2014, Italy has been China’s biggest target in Europe with a surge of investment in the first half of the year. Close to half of the $7bn in total Chinese investment in Italy was made in 2014 alone. Portugal saw a jump in 2011 and in 2014. The UK has had two years of soaring Chinese activity. Since the debt crisis, Spain has experienced steady increases.
Chinese investment into Europe – while growing – still faces several obstacles. “Relative to China’s $4tn in foreign exchange reserves, the volumes are still not that large because Europe is not willing to sell China its top technologies and it doesn’t have very much else that China really wants,” said Derek Scissors, resident scholar at the conservative US think-tank, the American Enterprise Institute, and compiler of an independent database on Chinese outbound investment. “In the future, we’re probably going to see a steady increase [in Chinese investment to Europe] but no huge breakthroughs.”
“Companies are now buying $200m German companies instead of $20m ones,” Mr Scissors said.
Foreign direct investment into China, which hit $117bn last year, still significantly outstrips China outbound investment, which reached $108bn in 2013, according to China’s Ministry of Commerce data.
Those same figures suggest Europe was the only region that saw a drop in outbound Chinese investment in 2013, with a fall of more than 15 per cent. However, the data appear to significantly undercount the actual flow and do not count investment routed to Europe through Hong Kong.
In just one example of how problematic these official figures can be, they have historically counted tiny Luxembourg as the largest recipient of Chinese investment in Europe. That is because Chinese companies often choose to incorporate legal entities there to take advantage of looser tax and corporate structure requirements before using those entities to make investments elsewhere in the continent.
Liao Qun, chief economist and head of research at Citic Bank, predicts China’s total outbound investment to exceed $200bn by 2017 and a growing share of that amount will be destined for Europe.
A survey by the European Union Chamber of Commerce in China found that Chinese companies rated labour laws, human resource costs, immigration rules and “cultural differences in management style” as the biggest obstacles to operating in the continent.
But in a sign of things to come, an overwhelming majority – 97 per cent – of Chinese companies that have invested in Europe said they plan to invest more in the coming years.
[paste:font size="5"]European purchases. Chinese property and entertainment conglomerate Wanda paid more than £300m for Dorset luxury yachtmaker Sunseeker International last year.
The trend will only strengthen, according to Mr Drayton, as Chinese private equity groups will be able to pay the extra amount of money allowing them to win over western buyout groups in competitive auctions.
Chinese investors surged into EU at height of debt crisis - FT.com
Chinese investors surged into EU at height of debt crisis
As investors fled Europe in the worst days of its sovereign debt crisis, China-based companies moved in the other direction and surged in, with cash flowing from China into some of the hardest-hit countries of the eurozone periphery.
In 2010, the total stock of Chinese direct investment in the EU was just over €6.1bn – less than what was held by India, Iceland or Nigeria. By the end of 2012, Chinese investment stock had quadrupled, to nearly €27bn, according to figures compiled by Deutsche Bank.
The buying spree, analysts say, was nothing short of a transformation of the model of Chinese outbound investment. It is expected to increase steadily over the next decade.
“We saw a massive spike in Chinese investment in Europe, particularly [mergers and acquisitions] during the height of the debt crisis,” says Thilo Hanemann, an expert in Chinese outbound investment and research director at Rhodium Group, a research consultancy.
“This was partly opportunistic buying because assets were cheap and partly it was a structural secular shift in Chinese outbound investment, from securing natural resources in developing countries to acquiring brands and technology in developed countries.”
The Financial Times this week investigates the modern trail of Chinese investment, migration and ambition in Europe. A seriesof reports from Beijing to Milan to Madrid to Lisbon to Athens reveal the scale of China’s expansion in Europe, the flow of investment and the strategies of Chinese investors and migrants caught up in a national effort – a “going out” policy in place since 1999 – to find new markets and enhance China’s economic strength.
The incursion has not been all plain sailing. When a Chinese state-owned consortium won the bid to build a road from Warsaw to the German border, the government in Beijing presented the deal as a model for Chinese contractors in Europe.
But after cost over-runs and repeated breaches of local labour law, the Polish government cancelled the contract with Covec, the Chinese consortium, in 2011 – less than two years into the project.
What befuddled the Chinese company most were Polish environmental laws requiring tunnels for wildlife to be built beneath the road and a two-week work stoppage while seven rare species of frogs, toads and newts were moved out of the way.
The disaster has become business folklore in Beijing – a parable of the legal and cultural issues Chinese investors face when trying to do business or buy companies in Europe. Still, the obstacles faced by Covec, as well as other pioneering companies, have not dented China’s confidence in European ventures even in times of turmoil.
Total annual Chinese investment in Europe has dropped somewhat from the peak years of 2011 and 2012, but analysts across the continent see robust deals in the making and signs that investment will increase significantly this decade.
Official data on Chinese outbound – and inbound – investment are notoriously unreliable because the government does not measure most activity by Chinese companies’ offshore subsidiaries and does not attempt to work out where investment ends up.
Independent entities such as Rhodium Group and the Heritage Foundation, a conservative US-based think-tank, have chronicled a recent shift in Chinese money from resource-rich developing countries in Africa to partnerships in developed countries, including Europe.
Private Chinese enterprises are playing an important role in the transition. State-owned Chinese companies were the vanguard for China’s outward investment, with state-owned businesses accounting for 78 per cent of investment in Europe between 2008 and 2013, according to Deutsche Bank. At home, state behemoths dominate industries such as telecoms, transport, energy and finance.
But between 2011 and 2013, private companies’ share in Chinese M&A activity in the continent rose to over 30 per cent – compared to 4 per cent in the previous three years, Deutsche Bank research shows.
Investment tends to cluster in individual countries in any given year, according to data compiled by the Heritage Foundation. So far in 2014, Italy has been China’s biggest target in Europe with a surge of investment in the first half of the year. Close to half of the $7bn in total Chinese investment in Italy was made in 2014 alone. Portugal saw a jump in 2011 and in 2014. The UK has had two years of soaring Chinese activity. Since the debt crisis, Spain has experienced steady increases.
Chinese investment into Europe – while growing – still faces several obstacles. “Relative to China’s $4tn in foreign exchange reserves, the volumes are still not that large because Europe is not willing to sell China its top technologies and it doesn’t have very much else that China really wants,” said Derek Scissors, resident scholar at the conservative US think-tank, the American Enterprise Institute, and compiler of an independent database on Chinese outbound investment. “In the future, we’re probably going to see a steady increase [in Chinese investment to Europe] but no huge breakthroughs.”
“Companies are now buying $200m German companies instead of $20m ones,” Mr Scissors said.
Foreign direct investment into China, which hit $117bn last year, still significantly outstrips China outbound investment, which reached $108bn in 2013, according to China’s Ministry of Commerce data.
Those same figures suggest Europe was the only region that saw a drop in outbound Chinese investment in 2013, with a fall of more than 15 per cent. However, the data appear to significantly undercount the actual flow and do not count investment routed to Europe through Hong Kong.
In just one example of how problematic these official figures can be, they have historically counted tiny Luxembourg as the largest recipient of Chinese investment in Europe. That is because Chinese companies often choose to incorporate legal entities there to take advantage of looser tax and corporate structure requirements before using those entities to make investments elsewhere in the continent.
Liao Qun, chief economist and head of research at Citic Bank, predicts China’s total outbound investment to exceed $200bn by 2017 and a growing share of that amount will be destined for Europe.
A survey by the European Union Chamber of Commerce in China found that Chinese companies rated labour laws, human resource costs, immigration rules and “cultural differences in management style” as the biggest obstacles to operating in the continent.
But in a sign of things to come, an overwhelming majority – 97 per cent – of Chinese companies that have invested in Europe said they plan to invest more in the coming years.
[paste:font size="5"]European purchases. Chinese property and entertainment conglomerate Wanda paid more than £300m for Dorset luxury yachtmaker Sunseeker International last year.
The trend will only strengthen, according to Mr Drayton, as Chinese private equity groups will be able to pay the extra amount of money allowing them to win over western buyout groups in competitive auctions.
