China Direct

MERICS - Chinese Inward Investment Trends into Europe - A Report

Berlin, May 9, 2023. Battery investments are now the mainstay of Chinese investment in Europe, showing that the region has become a key part of China’s global electric vehicle (EV) expansion. 

This is one of the key findings from a report published today by the Mercator Institute for China Studies (MERICS) and Rhodium Group on the latest trends in China's foreign direct investment (FDI) footprint on the EU-27 and UK.
According to the authors, there has been a substantial shift in the nature of Chinese investment in Europe: driven by EV battery factories, greenfield investment now dominates Chinese investment activities in the region, reaching EUR 4.5 billion and 57 percent of China’s total FDI in Europe in 2022. 

Chinese greenfield projects, in which parent companies create subsidiaries in foreign countries and build operations from scratch, overtook mergers & acquisitions (M&A) in Europe for the first time since 2008. The latter fell to EUR 3.4 billion in 2022, the lowest level since 2011.

The increase in greenfield investment was driven mainly by a few large-scale projects, almost exclusively concentrated in the automotive sector as Chinese battery giants – including CATL, Envision AESC and SVOLT – invested in building plants in Germany, Hungary, the UK and France.

These four countries were also the main recipients of Chinese investment in Europe in the past year, accounting for 88 percent of China’s total FDI. All four not only received major greenfield investments, but also most of the year’s M&A activity. 

Overall, Chinese investment in the EU and the United Kingdom continues to decline, dropping to a decade low of just EUR 7.9 billion in 2022, down 22 percent compared to the year before. This takes Chinese investment back to its 2013 level. As in 2021, consumer products and automotive remained the two top sectors, accounting for three quarters of total Chinese investment in Europe.  

Ongoing and new greenfield investments will put a floor under aggregate investment amounts, and Chinese firms are considering further expansion in Europe in segments of EV value chains, including vehicle production. Yet these will not be enough to create a long-lasting rebound in overall Chinese FDI in Europe, as the experts from MERICS and the Rhodium Group write. 

You can read the report “EV battery investments cushion drop to decade low: Chinese FDI in Europe – 2022 update” by Agatha Kratz, Max J. Zenglein, Mark Witzke and Gregor Sebastian online here.

Best regards,
Claudia Wessling, Director Communications and Publications MERICS 

Our sincere thanks to Claudia Wessling and the team at MERICS for providing this report.

Chinese FDI into Europe - trends and insights from The Rhodium Group & MERICS

 

 

The times when China invested vast amounts of capital in Europe are over for now, but Chinese investors are focusing their interest on promising start-ups in high-tech sectors. This is a trend that policymakers and business leaders in Europe should keep an eye on, as the authors of the new study "Chinese FDI in Europe - 2021 Update" by Rhodium Group and the Mercator Institute for China Studies (MERICS) note.

Chinese outbound investment to the rest of the world stalled in 2021, increasing by just 3 percent to USD 114 billion (EUR 96 billion). China’s global outbound M&A activity even slipped to a 14-year low, with completed transactions totaling just EUR 20 billion.

China’s FDI in Europe (EU-27 and the UK) rose but remained on a multi-year downward trajectory. Last year, completed Chinese FDI in Europe increased 33 percent to EUR 10.6 billion, bouncing back after a sharp decline caused by the Corona pandemic in 2020. Still, 2021 was the second lowest year (above only 2020) for China’s investment in Europe since 2013.

The takeover of Philips’ domestic appliances business by Hong Kong based Hillhouse Capital made the Netherlands the biggest destination for Chinese investment in 2021, followed by Germany, France and the UK. Consumer products, automotive (NEV batteries), health, pharma and biotech, ICT, and energy were the top sectors.

Overall, the nature of Chinese investment in Europe is changing. The share of Chinese state-owned investors fell to a 20-year low, concentrating on energy and infrastructure projects in southern Europe. After years of being dominated by M&A, Chinese investment in Europe has become more focused on greenfield projects, which reached a record value of EUR 3.3 billion in 2021.

Chinese venture capital (VC) investors are pouring into European tech startups. In 2021, Chinese VC investment in Europe more than doubled to a record EUR 1.2 billion. This investment was concentrated in the UK and Germany, and focused on a handful sectors including e-commerce, fintech, gaming, AI and robotics.

Two authors of the study commented on their findings:
Agatha Kratz, Director at Rhodium Group: "The nature of Chinese investment in Europe has fundamentally changed in recent years. The days of multi-billion-euro acquisitions in strategic sectors may well be behind us. In their place, we are seeing Chinese companies setting up their own plants in Europe, particularly in areas where they enjoy a competitive advantage, like electric batteries. Chinese firms are also increasingly active investors in European start-ups. These are not necessarily alarming trends as such investments can contribute positively to European economic activity. But they should be closely monitored by European policymakers as they reassess the risks of economic engagement with China."

Max J. Zenglein, Chief Economist at MERICS:

“Compared to the peaks around 2016, Chinese investments in Europe remain stuck at low levels. However, the fact that Chinese M&A activity in Europe increased again in 2021 while China’s global M&A fell, shows that Europe remains an attractive investment destination. But at these reduced levels any movement is vulnerable to a single large deal that can push investment up or down. In the current difficult economic and regulatory environment Chinese in Europe are unlikely to pick up significantly anytime soon.”

You can read and download the study “Chinese FDI in Europe: 2021 Update” by Agatha Kratz, Max J. Zenglein, Gregor Sebastian and Mark Witzke here.

Our sincere thanks to both The Rhodium Group and MERICS for kindly sharing this Report.

Chinese companies invest in UK: 2021 Tou Ying Tracker 中资企业在英投资：2021年投英跟踪调查

 

 

The largest Chinese companies in the UK contributed £63 billion to the economy in 2021. That's the key finding of our latest Tou Ying Tracker. Produced in collaboration with China Chamber of Commerce in the UK (CCCUK) and China Daily UK, the report tracks all Chinese investment in the country, from growth to M&A – bringing you key data from the largest Chinese companies in the UK.

本年度调研显示，在英大型中资企业雇为英国经济贡献了630亿英镑的总收入。通过与英国中国商会（CCCUK）、中国日报英国公司合作，致同2021年投英跟踪调查分析了中资企业在英国的商业投资活动，从增长到并购——为您带来在英大型中资企业的关键数据。

To download the bilingual report please follow the links below.

Tou Ying Tracker 2021 ENG

Tou Ying Tracker 2021 CH

For more information please contact:

Simon Bevan or Ian Zhu of Grant Thornton's China Britain Business Group.

[email protected]

[email protected]

 

Chinese investment in UK: growth continues in H1 2021

Chinese investors continue to make a significant contribution to the UK economy in the first half of 2021. Simon Bevan and Ian Zhu look at the deals and trends you need to know about. The number of Chinese investments in the UK during H1 2021 reached pre-COVID-19 levels, showing a healthy rebound in deal activity with a 44% increase year-on-year. Deal value for the period has plummeted by 68% to £1441 million, but this is due to one exceptionally high-value deal in H1 2020: Chinese Resources Group’s £4.2 billion acquisition of UK recycling business Viridor — the biggest deal of the year.

For more information and the latest insights into Chinese investment in the UK please visit here.

Our thanks to Simon Bevan and Ian Zhu of the China Britain Business Group at Grant Thornton LLP for kindly sharing.

Chinese Foreign Direct Investment (FDI) into Europe: 2020 Update

 

Dear CBI Members and Partners,

Please find an Executive Summary and a link to the full report, kindly provided by Merics, the Mercator Institute for China Studies, below:

Chinese FDI in Europe: 2020 Update

Investment falls to 10-year low in an economically and politically challenging year

Executive summary

• China’s global outbound investment hit a 13-year low in 2020: Concerns that the Covid-19 global pandemic slump might trigger another round of Chinese distressed asset-buying proved unfounded. Instead, China’s global outbound M&A activity dropped to a 13-year low, as completed merger and acquisition (M&A) transactions totalled just EUR 25 billion, down 45 percent from 2019.
• China’s FDI in Europe continued to fall, to a 10-year low: Shrinking M&A activity meant the EU-27 and the United Kingdom saw a 45 percent decline in completed Chinese foreign direct investment (FDI) last year, down to EUR 6.5 billion from EUR 11.7 billion in 2019, taking investment in Europe to a 10-year low. However, greenfield Chinese investment reached its highest level since 2016 at nearly EUR 1.3 billion.
• The “Big-3” reclaimed their top spot, Poland emerged as a key recipient: More than half of total Chinese investment in Europe went to the “Big Three” economies – Germany, the UK and France. However, the UK saw Chinese investment plummet by 77 percent. Poland rose to become the second most popular destination, though inflows of EUR 815 million were largely concentrated on one acquisition.
• China’s state-owned enterprises (SOEs) took a higher share in a quiet market: SOEs were responsible for 18 percent of total Chinese FDI to Europe, higher than 11 percent 2019 but still significantly below historical averages. Their investment stayed relatively stable in absolute terms, however, concentrating in energy, infrastructure and basic materials. Private sector investment dropped by almost 50 percent.
• Chinese investment was spread more evenly across sectors: Small- and mid- size transactions dominated in 2020, with no major billion-dollar acquisitions as in 2019. As a result, Chinese investment was spread more evenly across sectors. Infrastructure, ICT and electronics were the top three sectors, attracting 51 percent of the total.
• Chinese FDI faces greater scrutiny by EU member states: The Covid-19 crisis prompted the EU to issue guidelines stepping up scrutiny of FDI in Europe’s critical assets. 14 EU member states, including Italy, France, Poland and Hungary, have updated their FDI screening mechanisms last year. Member states have also moved to block several acquisitions by Chinese firms.
• Headwinds to Chinese investment in Europe will grow in 2021: Chinese FDI activity into Europe continued to fall in the first quarter of 2021 and has remained weak elsewhere, even as global M&A activity has recovered and surged to a 10- year high of EUR 1.08 trillion. Europe remains an attractive investment location. However, continued disruption from Covid-19, high barriers to outward capital flows in China and rising regulatory barriers to foreign investment in Europe have all contributed to low levels of Chinese investments. Deteriorating EU-China relations will create additional headwinds for Chinese investors going forward.

The full Executive Summary and Report can be downloaded directly via this link.

Our thanks again to Merics and the Rhodium Group.

 

 

Irwin Mitchell: UK Powerhouse Report 2021: How Foreign FDI will help UK Cities Recover

CBI Member Irwin MitchelI has just published the 2021 UK Powerhouse Report which looks at how foreign direct investment (FDI) will play an instrumental role in helping UK cities recover.

Please refer to the Executive Summary and insights via the link below:

UK Powerhouse Report

Our thanks to Irwin Mitchell for kindly sharing this report.

 

UK FDI Flows 2019-20 - A DIT Summary

The UK's Department for International Trade has just published its latest FDI figures to the UK.

• The UK attracted 1,852 new inward investment projects in the 2019/20 financial year; a 4% increase on the previous year.
• Investment from #AsiaPacific was responsible for 190 of those projects, with #Australia and #NewZealand accounting for 72 projects, and #Japan 65 projects.
• Please download the PDF below to find out how your sector has performed:
• Download Department_for_International_Trade_inward_investment_results_2019_to_2020

CHINA DIRECT would like to thank UK Gov in APAC for kindly sharing this information.

Huawei launches mobile ecosystem for UK developers

 

CBI member, Huawei launched its investment plan and developer tools at the company’s first ever UK and Ireland Huawei Developer Conference on Wednesday, with the aim being to provide the tools and support to allow local developers to work and design products for the Huawei Mobile Services operating system.

Huawei Mobile Services is Huawei’s dedicated mobile ecosystem, and provides mobile phone users with many essential features, such as Huawei ID, push notifications, payments and other services.

By electing to integrate HMS into their operations, businesses will be able to receive direct access to Huawei’s hardware and artificial intelligence technology.

24 HMS core kits were launched at the conference held in London, and are aimed at providing businesses and developers with access to open source developer kits so that they can develop and integrate apps for the Huawei app Gallery.

Huawei also announced an investment plan of £20 million to help promote UK and Irish developers working with HMS and developing products to join the Huawei App Gallery.

Anson Zhang, managing director of Huawei UK’s Consumer Business Group, said: “Ultimately, [Huawei] envision an all-scenario intelligent consumer experience for the future of Huawei Mobile Services and will provide businesses and developers with the opportunity to reach new audiences, expand and monetise, as they prepare for a fully connected world.”

According to Huawei, HMS already has four million users in the UK alone.

Huawei is the CBI’s strategic partner for the CBI Chinese New Year Dinner. Now in its sixth year, the CBI’s annual flagship event with a focus on China brings together senior professionals from business, politics and media to celebrate the long-standing relationship between the UK and China.

To be held 27^th January 2020 at the Mandarin Oriental Hyde Park Hotel, London. For bookings, please follow the link.

British Business optimistic about 2020 China market opportunities

Dear CBI Members and Partners,

The British Chamber in China recently published its 2020 British Business Sentiment Survey in Beijing.

The Survey revealed that:

• More than 50% of respondents were optimistic about the China market and intended to continue to invest

However:

1. More UK businesses report that it is harder to do business in China
2. More than 30% feel that they are not treated fairly compared to domestic firms

According to the Survey the top three regulatory issues are:

1.     Cybersecurity & IT restrictions
2.     Accessing and moving company finances
3.     Competition with SOE (State Owned Enterprises) or state-sponsored companies  

For a detailed overview of the Business Sentiment Survey (English & Chinese versions) please access and download the survey here.

Our thanks to partner The British Chamber in China for sharing these insights.

PWC update on China’s Lianghui or Two Sessions meeting

 

 

CBI member, Price Waterhouse Coopers has released an insight report documenting the events at last week’s LiangHui or ‘Two Sessions’ meeting, which took place in Beijing from March 3^rd – 15^th.

Titled, ‘What are the Business Implications from China’s Two Sessions?’ PWC’s report sets out the following as key takeaways:

• China will speed up the all-round opening-up of the economy by improving the business environment, particular in terms of rule of law and opening up more areas to foreign investment.
• China will continue to fight three major battles against significant risks, poverty and pollution.
• Supply-side structural reform still plays a vital role in economic development.
• Manufacturing and consumption will benefit from tax cuts for the manufacturing sector and individual tax deductions. Other takeaways include, the fact that the Chinese government has set the major economic targets for 2019 including: GDP growth of 6% to 6.5%, creating 11 million new urban jobs, and maintaining the surveyed employment rate at around 5.5%. PWC’s ‘standout sector’ are the financial services institutions active in the China market, who have made significant progress covering, securities, insurance and providing credit ratings. PWC accounts that foreign investment in China’s bond market has increased by nearly 600 million Renminbi in 2018, and the total amount has now reached about 1.8 billion Yuan.  
• Please follow the link to find the complete report.