We Do Without Chinese Series Capital Expert
This article is from the International Economics Campaigning. Series of France’s Research Centre in International Economics (CEPII), a CEPII-La Tribune-The Conversation-Xerfi-Canal partnership. Francoise Lemoine (CEPII advisor) and Andrea Goldstein adjunct. Professor at the Catholic University of Milan, are experts in the Chinese economy. Jezabel Couppeyy-Soubeyran and Isabelle Bensidoun, CEPII economists, ask them questions.
Jezabel Couppeyy-Soubeyran, Isabelle Bensidoun: China is the second-largest international investor after the United States. How has China’s investment changed over the past years?
Francoise Lemoine, Andrea Goldstein, The foreign investment of Chinese companies (FDI). Reached nearly US$200billion in 2016, a record that is about one-sixth the total global FDI. China’s overseas investment now surpasses that of other foreign multinationals.
In the beginning, Chinese investors were focused on natural resources in Africa, and in the developing world. However, their focus has shifted to manufacturing and services in Europe and the United States.
China’s main target has been Europe, particularly France, Germany, Italy and the United Kingdom. The Chinese acquired more than twice as many assets in Europe between 2014 (EUR14billion) and 2016, (EUR35billion). No sector is left behind, from high-tech to real estate, tourism, automobiles and food to energy.
What Is The Chinese Company Looking For In These Acquisitions?
They first seek patents, brands, and know-how. This is due to the priority that was given to technological catch up in the government’s Made in China 2025 plan, which was adopt in 2015. Chinese companies want to increase their supply, even in the domestic market, where foreign brands are most sought after. They also want to meet the growing demands of a middle class that is demanding more quality, safety, and image. One example of this the Brittany-base powder milk plant, which is 100% destine for China.
Are There Any Concerns About Series This Activism?
Yes, quite a few. Particular concern is express about the state-owned enterprises which can use as political pressure instruments. Europeans are concerned about the possibility that the Chinese could control major infrastructure such as electricity generation and distribution or sensitive technologies.
If these companies plan to move production to China’s domestic markets, which have weak social protections and low standards of labour rights, there is a risk of devastation to the European industrial system.
Finally, there is outrage over the asymmetry between the European market, which is open to Chinese companies, and the difficult-to-penetrate Chinese market. While Chinese investment in Europe is booming, Europe’s stagnating in China are due to Chinese investors.
What Is The Secret To This Series Anxiety?
At the moment, tensions are mainly between China and Germany. Berlin stopped the purchase of two diamonds in the German high-tech industry sector: Aixtron, a semiconductor equipment manufacturer, as well as a subsidiary of Osram, the lighting company.
Nothing has been comparable in France. Chinese acquisitions grew exponentially after Dongfeng Motors purchased 14% of French multinational automobile manufacturer PSA in 2014. In 2014, sovereign wealth fund China Investment Corporation bought 30% French utility GDF Sueez. 2015 saw the acquisition of Club Med, Toulouse airport and Louvre Hotels groups in France.
We saw last year the growth of Chinese capital in hotels (Accor Hotel) and leisure property Pierre & Vacances as well as the acquisition a majority stake of the SMCP fashion group (Sandro Maje, Claudie Pierlot). These operations met with mix feelings. They sometimes provoked the attention of the authorities.