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Friday, October 31st, 2014

Chinese investors: the key players in future global markets

Chinese investment map in Europe – ESADE StudyThe Chinese economy has pledged its commitment to foreign investment over the coming years. According to statistics collated by The Organisation for Economic Co-operation and Development (OECD), in 2013 there was $73 billion of foreign investment originating from China, an impressive 17% increase from that recorded in 2012 and almost 36 times more than the total invested in 2003. This figure puts China as the third largest foreign investor after The United States and Japan. The facts gathered by the Chinese Ministry of Commerce indicate that in 2013 there were 425 mergers and acquisitions valued at over $53 billion, while the figures collated by the National Statistics Institute and The State Administration of Foreign Exchange put this number at more than $108 billion. These figures, according to the State’s official estimates, would signal a 22.8% increase from 2012; a total that would then increase to $170.6 billion of Chinese foreign investment after just the first semester of 2014; a 47% increase from 2013.

If a decade ago the Asian giant was concentrating its efforts on emerging markets or developed countries with large reserves of natural resources such as Australia or Canada, from 2008 Chinese investors shifted their focus towards other markets, in particular those of Europe and North America. The interest was no longer simply a question of natural resources, but rather investment in industrialisation. Li Zhipay, researcher for the Foreign Investment Administration of the Chinese Ministry of Commerce, laid out several important changes which facilitated this shift such as territorial diversification as well as the progress of private businesses over state owned enterprises in terms of the amount of investment. In 2012 investment figures were placed at around an average of $100 million while last year this rose to $125 million. Recently a spokesman from The Chinese Ministry of Commerce, Shen Danyang, claimed that, in 2015, for the first time Chinese foreign investment would overtake investment in China itself. Amongst the reasons for this switch, presented by Danyang, were factors such as China being a country with the second highest GDP in the world as well as having a total potential investment of more than $4 trillion.

Chinese Investment in Spain – ESADE StudyRecently, the Chinese government has implemented a series of favourable measures to incentivize Chinese companies to increase and diversify their foreign investment, (in 2013 24% of total investment ended up in the energy sector), which according to estimates made by the Chinese government will result in a 200% increase in European investment. Currently this only corresponds to 5.5% of the total. The slow rate of internal growth, coupled with an increase in consumption, has exacerbated the exodus of investors in search of new markets, with the financial, technological and real estate sectors receiving particular interest.

When it comes to addressing the topic of Chinese investment in Spain it is worth referring to several statistics gathered by the “Chinese Investment in Spain 2014” study published by ESADE. The findings indicate that 2012 marked the start of the dramatic influx of Chinese investment in Spain, with €409 million invested, making China the tenth largest investor in the country. It is fascinating to compare these figures with those from 2005 to better understand the scale and significance of this shift in investor perspective as in that year China barely invested more than €600,000, putting it in 65th place on the list of foreign investors.

The investment from Chinese companies in Spain has traditionally been related to the energy, industrial, telecommunications, logistics and transport sectors however in the last few months we have been witnessing a gradual increase in transactions made in several other industries. The hotel, food and agriculture and real estate industries have all seen investment. Indeed in the past year HNA became 20% stakeholders in NH Hotels, Shuanghui International Holdings purchased the firm Smithfield and now control Campofrío and Dalian Wanda bought the iconic ‘España’ building in Madrid.

Motives for Chinese investment in Spain – ESADE StudyTurning to the small investor, the increase in interest and investment can largely be attributed to the introduction of the Law to Support Entrepreneurs and their Internationalisation which facilitates the granting of visas and residence permits to those investing a minimum of €500,000 in real estate. The Law also grants visas to those investing in a business project confirmed as being of general interest to Spain. With regards to this, it is worth noting the key role Rimontgó played in the granting of the first visas of this kind, by the Spanish Consulate in Beijing, to two Chinese investors involved in a wine making project in Castile and Leon.

The photos shown are from the “Chinese Investment in Europe 2014” study, carried out by ESADE.

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