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According to consulting company EY, Chinese investment in European companies almost tripled in 2016 - from $ 30.1 billion in 2015 to $ 85.8 billion in 2016. Total cash flow for the last year was greater than investments for the previous four years combined. Growth of Chinese investment in Germany was particularly significant. It jumped up almost 24 times, from $ 530 million in 2015 to $ 12.6 bln. Switzerland is in the first place in terms of investment volume. This fact is associated with ChemChina’s major transaction for acquisition Swiss company Syngenta (worth $ 45.8 billion). Germany comes the second, and the United Kingdom - third ($ 9.6 billion). Midea Group’s acquisition of robots manufacturer Kuka for $ 4.7 billion was the largest transaction conducted in Germany.
Chinese purchased 309 European companies or interest in them during the year. Germany, with 68 acquisitions, takes the first place by number of deals. The second place is occupied by the United Kingdom (47 acquisitions), the third - France and Italy (34). For comparison, Chinese bought only 51 European companies ten years ago in 2007.
"Chinese companies have a huge interest to acquisitions in Europe - especially in Germany. Chinese investors are willing to pay large sums as to enter new business and strengthen their position in the high-tech sector", - said Alexander Kron, Transaction Advisory Services Managing Partner. According to experts, growth of Chinese investment in Europe, and especially in Germany, could be caused by Brexit and election of the US president, Donald Trump. "Given Brexit, many Chinese companies are thinking about transferring European headquarters from the UK to Germany. It may also strengthen position of Germany as the most important area in Europe for Chinese companies ", - said Mr. Kron.
For many years, China has encouraged companies to hold foreign acquisition to gain access to new technologies, brands and management experience. Within its policy of "going out", Beijing loosened requirements for approval of foreign transactions and reduced capital controls.
Afterwards, however, Chinese regulators significantly increased their efforts to curb capital flight as weakening of the national currency could further spur capital outflows from the country. Statement of State Administration of Foreign Exchange declared, in particular, the need to introduce drastic restrictions on acquisitions, carried out by Chinese companies abroad, including ban on the majority of transactions in excess of $10 billion and tightening control over large foreign transactions (worth more than $2 billion dollars).
In November and December 2016, the Chinese authorities started to closely monitor transactions in areas such as real estate, hotels, studio, show business and sports clubs. They are looking for "unsustainable trends in foreign investment", as described by the National Commission for Development and Reform Commission, Ministry of Commerce and other departments of China. Earlier, the Chinese authorities have resorted to only limited efforts to ensure control over cross-border cash flows, for example, to limit volume of funds that can be withdrawn at one time in Macau by holders of bank cards issued in China.
Radical change of Beijing’s positions on investment abroad came just at a time when lawmakers of the US, Australia and other countries are starting to express concern that national security of their countries can be compromised. They are afraid that the deals could give Chinese companies control of advanced technology or resources including oil, coal, or farmland. Given this, it may well be so that US and European companies can begin to react negatively to offer Chinese investors.
source: ey.com
Chinese purchased 309 European companies or interest in them during the year. Germany, with 68 acquisitions, takes the first place by number of deals. The second place is occupied by the United Kingdom (47 acquisitions), the third - France and Italy (34). For comparison, Chinese bought only 51 European companies ten years ago in 2007.
"Chinese companies have a huge interest to acquisitions in Europe - especially in Germany. Chinese investors are willing to pay large sums as to enter new business and strengthen their position in the high-tech sector", - said Alexander Kron, Transaction Advisory Services Managing Partner. According to experts, growth of Chinese investment in Europe, and especially in Germany, could be caused by Brexit and election of the US president, Donald Trump. "Given Brexit, many Chinese companies are thinking about transferring European headquarters from the UK to Germany. It may also strengthen position of Germany as the most important area in Europe for Chinese companies ", - said Mr. Kron.
For many years, China has encouraged companies to hold foreign acquisition to gain access to new technologies, brands and management experience. Within its policy of "going out", Beijing loosened requirements for approval of foreign transactions and reduced capital controls.
Afterwards, however, Chinese regulators significantly increased their efforts to curb capital flight as weakening of the national currency could further spur capital outflows from the country. Statement of State Administration of Foreign Exchange declared, in particular, the need to introduce drastic restrictions on acquisitions, carried out by Chinese companies abroad, including ban on the majority of transactions in excess of $10 billion and tightening control over large foreign transactions (worth more than $2 billion dollars).
In November and December 2016, the Chinese authorities started to closely monitor transactions in areas such as real estate, hotels, studio, show business and sports clubs. They are looking for "unsustainable trends in foreign investment", as described by the National Commission for Development and Reform Commission, Ministry of Commerce and other departments of China. Earlier, the Chinese authorities have resorted to only limited efforts to ensure control over cross-border cash flows, for example, to limit volume of funds that can be withdrawn at one time in Macau by holders of bank cards issued in China.
Radical change of Beijing’s positions on investment abroad came just at a time when lawmakers of the US, Australia and other countries are starting to express concern that national security of their countries can be compromised. They are afraid that the deals could give Chinese companies control of advanced technology or resources including oil, coal, or farmland. Given this, it may well be so that US and European companies can begin to react negatively to offer Chinese investors.
source: ey.com