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Chinese Investment in Europe Fell Sharply

Chinese investments in EU countries are experiencing a sharp decline for the second year in a row. The combined value of completed Chinese FDI transactions in the EU fell to EUR 17.3 billion in 2018, down 40 percent from 2017 levels (EUR 29.1 billion). This represents the lowest investment level since 2014.

According to a report that the German think tank The Mercator Institute for China Studies (MERICS) and the U.S. consulting firm Rhodium Group jointly published on March 6, after the peak of EUR 37.2 billion in 2016, Chinese investments in the EU dropped to EUR 29.1 billion in 2017 and dropped further down to EUR 17.3 billion in 2018.

“The lion’s share of Chinese investment in the EU’s 28 member countries continued to go to the three biggest economies in Europe—the UK (EUR 4.2 billion), Germany (EUR 2.1 billion) and France (EUR 1.6 billion)—which received 45 percent of China’s investments in Europe.”

Despite the decline in Europe, Chinese investment in Germany has risen. Compared with 2017, China’s investment in Germany in 2018 increased by EUR 400 million. This includes China Tiancheng Pharmacy Ltd.’s acquisition of German competitor Biotest, and Ningbo Jifeng Auto Parts’ purchase of German auto parts supplier Grammer.

An important reason for the overall decline in Chinese overseas M&A is that China has continued strict capital controls and tightened liquidity, making it difficult for companies to transfer funds abroad. That European countries have increasingly strict controls over acquisitions has also increased the difficulty for Chinese companies to complete acquisitions. European countries are expected to exert stricter controls over acquisitions.

However, in the near term, the recent expansion of the US investment screening regime and the continued US–China tensions, may also boost Chinese investment in Europe.

Source: Radio France International, March 6, 2019