Chinese Enterprises Achieve Win-Win with Europe
Chinese Enterprises Seek New Business in Europe
Comprised of some of the world’s most advanced economies, the EU, a highly integrated economic bloc, plays a decisive role in the global economy.
The U.K., owing to its mature capital market and good investment conditions, has attracted many Chinese enterprises. In recent years, China’s investment in the U.K. has grown fast and entered various fields covering agriculture, energy, finance, real estate, technology and transportation, with energy, transportation and real estate absorbing the majority of the investment. So far, over 500 Chinese enterprises have established branches in the U.K., with China’s OFDI stock there reaching US $32.3 billion. In general, most Chinese enterprises run without a hitch in the U.K.
In February 2013, China’s automaker Geely bought the U.K.’s Manganese Bronze for £11.04 million. The classic black cab manufactured by Manganese Bronze is a cultural symbol of London. Geely purchased Manganese Bronze’s key assets and business to better explore the British market and also with a view to entering the local market of car rental and private cars. Meanwhile, the acquisition and operation of Manganese Bronze helped Geely better understand the laws and regulations of the international market, market demand and social conditions, so as to accumulate experience for future international operation.
Other examples in the transport sector include SAIC Motor’s cooperation with Rover to produce the MG 6, a mid-size car, in a venture that explored a new cooperation model: designed in the U.K. – made in China.
Further, the China National Petroleum Corporation (CNPC) acquired part of INEOS Refining, and Huawei Technologies and ZTE expanded their manufacturing, R&D and testing centers in the U.K.
In 2014, China’s investment in the U.K. maintained its momentum of fast growth. According to Heritage Foundation statistics, from January to June, Chinese enterprises made 16 investments in Europe, each worth over US $100 million, with total investment hitting US $12.87 billion. Among those, seven investments totaling US $4.87 billion were made to the U.K.
In 2009, the sovereign debt crisis swept the region, seriously affecting its economy as many foreign investors gradually withdrew their capital. But Chinese enterprises nonetheless stepped up European investment. Chinese enterprises, while increasing investment in key countries, also started to amplify their ventures in countries that had suffered the most under the Eurozone crisis.
Against this background, several factors enabled Chinese enterprises to enhance their investment in Europe. First of all, the debt crisis brought down the share prices of some European enterprises, lowering the cost of mergers and acquisitions. Secondly, the crisis led to a credit crunch resulting in liquidity shortages. By purchasing shares and undertaking acquisitions, Chinese enterprises could help suffering economies ride the storm. Thirdly, some heavily indebted European countries were forced to privatize state-owned property, which provided investment opportunities for Chinese enterprises. Finally, the EU provided a favorable policy environment for Chinese investment.
As the fourth largest economy in Europe, Italy is home to some very competitive brands, and before the European debt crisis, Chinese enterprises that had invested there performed well. Haier (Italy) serves as a good example of China’s OFDI success.
In 2001, Haier purchased a refrigerator manufacturer in Campodoro in northeast Italy, launching its maiden voyage into the European market. To begin with, Haier used the existing production line to manufacture hotel mini-bar refrigerators. Two years later, based on market demand, Haier increased its investment in scientific research and development to launch a large-scale reform of the company, upgrading its products year by year. In 2008, the three-door Italian-style refrigerator developed by Haier won high praise from the market for its human-centered design. Today, Haier (Italy) mainly produces high-end products that suit the needs of European customers. Its annual production increased from 34,359 units in 2008 to 80,733 units in 2012. When European home appliance companies are forced to implement production restrictions and lay off employees, Haier (Italy) works overtime to finish the orders it receives.
Alongside the development of the China-Italy economic and trade relationship, investment from Chinese enterprises in Italy soared in 2014, as Chinese companies completed multiple large-scale mergers and acquisitions: Shanghai Electric bought a 40 percent stake in Ansaldo Energia, the Italian power equipment manufacturer; China’s State Grid bought a 35 percent stake in energy grid holding company CDP Reti for €2.1 billion; and the Shanghai-based Bright Food Group Co. acquired a majority stake in Italian olive oil maker Salov Group.
More and more Chinese enterprises have chosen to invest in another nation hit hard by the Eurozone crisis – Greece. So far there are 13 Chinese companies operating in Athens in such areas as port transportation, ship manufacturing, green energy, telecommunications and real estate.
