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17th Dec 2017

Focus

Chinese the most bullish on EU investment, report finds

  • Canary Wharf business district in London. Brexit will make Chinese business 'more likely' to invest in the EU and the UK. (Photo: Davide D'Amico)

Chinese business circles are more optimistic about investment prospects in the EU than their US and European counterparts, a new study has shown.

Ninety percent of Chinese investors said they will increase their investment in Europe over the next five years, compared to 74 percent of US businessmen, 58 percent of French, 50 percent of British, and 30 percent of Germans.

The report also finds some 78 percent of Chinese investors thinking that Europe has become "more attractive" over the past five years, compared to 71 percent in the US, 65 percent in Germany, 48 percent in France and 30 percent in the UK.


The study, commissioned by Invest Europe, an association representing Europe's private equity, venture capital and infrastructure sectors, and the Ipsos MORI pollster, surveyed 360 senior-level corporate and financial investment decision-makers in the five countries.

"Europe is seen as an attractive investment destination," the study said. Although "respondents from the USA and China are positive about their home markets, they are also bullish about Europe's improved attractiveness as an investment destination."

"It is encouraging that Chinese investors are so positive about Europe today and for the future," Invest Europe CEO Michael Collins told EUobserver. "It's a sign of strength and progress of European economy."

The study noted that "eurozone stability and economic growth are the main drivers of positivity."

It added that while "American respondents are more likely to focus on currency movement … those from China are more likely to highlight innovation, the start-up ecosystem and increased return on investment."

Europe's main structural advantages compared to the US and China, according to respondents, are its highly-skilled workforce, political and social stability, government incentives, and above all its "commitment to sustainability and the environment".

For the same investors, China's advantages are the availability of low-skilled workers, the level of economic growth and labour flexibility.

"Chinese investors are often interested in European acquisitions for strategic reasons," Collins noted. "They are looking to acquire technology, and companies that will complement their domestic operations."

He added that European investors say that "it is now very common to find Chinese investors bidding for the same assets."

"European companies fit in Chinese investors' broader strategy," he said.

Strategic reasons

He noted that current uncertainties over the US investment and trade played a small role in the EU's attractiveness on Chinese business.

"Strategic investors are investing for the very long term, for key strategic reasons. Short term political issues do not weigh so heavily in their decisions," he pointed out.

The study noted that US and China are "as likely as Europeans to rate Europe well", but that "respondents from China vary most notably in their opinions."

They are "more likely to rate Europe above average on six areas (most notably, taxation and labour flexibility), but also more likely to rate Europe below average on two areas (political stability and rule of law.)"

Strategic investors are investing for the very long term, for key strategic reasons. Short term political reasons do not weigh heavily in their decisions.

No Brexit impact

In this context, the UK exit from the EU is not considered as a obstacle to investment projects, with the Chinese being again the more bullish and "notably less concerned" about how Brexit negotiations will end.

Some 47 percent of them said that Brexit will make them "more likely" to invest in the EU, with only 9 percent saying they will be "less likely" to invest.

Only 22 percent of US investors said they would more likely to invest, compared to 38 percent of Germans and 33 percent of French.

Brexit will make 26 percent of British investors more likely to invest, against 31 percent who said they will be less likely.

The Chinese are also more willing than others to invest in the UK after Brexit: 58 percent said they will be more likely, against 11 percent saying they will be less likely.

Thirty percent of UK investors said they will be more likely to invest in their country after Brexit, while 31 percent said they will be less likely.

In the US, 29 percent said they will be more likely. The equivalent is 23 percent in Germany and 13 percent in France.

Open Commission

In 2016, according to a study by the Berlin-based Mercator Institute for China Studies (Merics), Chinese investments in the EU reached €35 billion, a 77-percent increase from the previous year.

In September, the European Commission presented a plan to 'screen' Chinese investments in Europe, with an aim to protect Europe's strategic assets.

But the plan is "still at a very early stage," Collins said.

He said that the plan was unlikely to undermine Chinese bullishness for the EU market, because "the Commission's objective is to ensure we are not too cautious in screening and potentially blocking investment."

"It is still open," he added.

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