In
the wake of a handful of high-profile Chinese investments in companies
like Volvo and a constant barrage of headlines declaring China’s
economic rise, some Europeans might have the impression they are already
being bought up by Beijing.
But while the country’s huge reserves make it an important participant in international debt markets, they do not represent a piggy bank that China Inc can raid to snap up big swathes of European industry.
In fact, China’s total stock of direct non-financial investment in the 27 European Union member states, while growing quickly, is still miniscule at around $15bn, according to a new study from Rhodium Group, an economic consultancy.
To put it in perspective, total Chinese investment in hard assets in Europe in recent decades is equivalent to the average weekly increase of its foreign exchange reserves in the first half of 2011.According to government figures, China’s global stock of outbound direct investment reached $330bn at the end of June, up from less than $30bn in 2002 but that still only accounted for about 1.6 per cent of the global total from all countries.
Given Beijing’s ambitions and the size of China’s economy, the Rhodium Group estimates that Chinese companies could invest as much as $1,000bn abroad between now and 2020, with much of it going to developed economies.
The vast bulk of those reserves is managed under a strict mandate that does not allow it to be spent on direct investments abroad. However, Beijing is encouraging its cash-rich state enterprises to expand beyond China’s borders and the country’s outbound investment is expected to surge in the coming years.
In fact, China’s total stock of direct non-financial investment in the 27 European Union member states, while growing quickly, is still miniscule at around $15bn, according to a new study from Rhodium Group, an economic consultancy.
To put it in perspective, total Chinese investment in hard assets in Europe in recent decades is equivalent to the average weekly increase of its foreign exchange reserves in the first half of 2011.According to government figures, China’s global stock of outbound direct investment reached $330bn at the end of June, up from less than $30bn in 2002 but that still only accounted for about 1.6 per cent of the global total from all countries.
Given Beijing’s ambitions and the size of China’s economy, the Rhodium Group estimates that Chinese companies could invest as much as $1,000bn abroad between now and 2020, with much of it going to developed economies.
The vast bulk of those reserves is managed under a strict mandate that does not allow it to be spent on direct investments abroad. However, Beijing is encouraging its cash-rich state enterprises to expand beyond China’s borders and the country’s outbound investment is expected to surge in the coming years.
“China’s
investment interest is moving from natural resources toward developed
economy assets such as brands, technology and distribution channels so
places like Europe will receive a greater portion of that $1,000bn,”
said Thilo Hanemann, research director at the Rhodium Group.
The
EU and Beijing are considering opening negotiations on an investment
treaty that would make it easier for Chinese companies to invest in
Europe and would help counter possible protectionist sentiment in
Europe.While European officials insist the continent is open to all foreign
investment Chinese officials complain that their companies are treated
unfairly and regarded as a threat while investors from the US are
welcomed.
Chinese direct investment in Europe in the first half of this year hit almost $3.3bn, exceeding the total for all of last year. If some large proposed deals in the energy, gas and PC sectors are completed, the total for this year could be as high as $8bn.Analysts say the biggest obstacles to more direct investment in Europe are Chinese companies’ lack of experience in international deal-making and their inability to adapt to the legal and political environment they encounter there
Chinese direct investment in Europe in the first half of this year hit almost $3.3bn, exceeding the total for all of last year. If some large proposed deals in the energy, gas and PC sectors are completed, the total for this year could be as high as $8bn.Analysts say the biggest obstacles to more direct investment in Europe are Chinese companies’ lack of experience in international deal-making and their inability to adapt to the legal and political environment they encounter there
