Chinese Foreign Direct Investments in the Heart of Europe

Chinese foreign direct investments expanded rapidly over the last decade. From 2005 on, Chinese foreign investments added up to almost 3,5 trillion US Dollar in 2015. This development is predicted to persist and even speed up over the next few years, making China one of the largest investors worldwide. In the past China mostly assured its resource requirements by investing in developing countries. Recently, the attention also shifted towards Europe.

The dominating type of Chinese foreign investments today are portfolio investments. However, foreign direct investments (FDIs) are outstripping portfolio investments in terms of invested capital. FDIs, in contrast to portfolio investments, allow investors to influence company decisions abroad. This is because more than 10% of a company´s voting shares are acquired. The possibility to influence the company’s strategy gained importance for Chinese investors. This is a result of a shift in investment focus. In the past, Chinese investors mostly focused on exploiting natural resources in developing countries. Recently, this shifted towards technology, brands and real estate. 

Playing a negligible role until 2010, Chinese FDIs gained importance as an investment vehicle in recent years. Foreign Direct Investments are likely become the major method of investing in foreign assets in the future. Until 2020, FDIs are predicted to account for more than 80% of Chinese foreign investments.

Chinese Foreign Direct Investments in Europe

Today, Chinese FDIs concentrate more and more on European companies. This trend arose due to two major reasons: first, Chinese companies want to shift up the value chain. Research and development, besides the core business of manufacturing, will play a key role in the operations of Chinese companies. That is why the acquisition of technology and knowledge in form of FDIs gained popularity in recent years. The second reason is the proximity to new markets. Foreign Directs Investments are a popular way of entering a market. FDIs enable foreign investors to make use of existing local networks. Customers are not only private consumers anymore but also other companies. It is therefore necessary to be present at the place of sales to maintain good services and relations.

In the past, Chinese FDIs in Europe focused on the UK, the Netherlands, Portugal and Luxemburg. In relation to the countries´ GDPs, there were still few Chinese FDIs in Germany, Spain, France and Italy. However, this is likely to change in the next years. These aforementioned countries stand out for their good infrastructure and political stability.

Chinese Foreign Direct Investments in Germany

In January 2016, the biggest Chinese investment in Germany took place. China National Chemical Corporation, a state owned enterprise, acquired German engineering company KraussMaffei Group for more than 1 billion US$. The acquisition did not receive much public attention, but it is a great example for the recent participation of Chinese investors in the German economy. Investments of this scale indicate that China´s foreign investment strategy now focuses on knowledge rather than physical resources. Germany is considered a leading nation in the fields of automotive and engineering. It gained an exceptional reputation for its quality products and highly-skilled professionals. Thus, these industries especially attract the attention of Chinese investors in order to prepare their portfolios for the future. High-end production assets are predicted too play a key role in future global competitiveness.

ECOVIS regularly helps foreign companies to find suitable and respectable Chinese Investors. If you need further information about how we can assist you getting acquired and want to find Chinese investors, please contact us: richard.hoffmann@ecovis-beijing.com